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The New Year is almost upon us and you have probably already started thinking about the goals and resolutions you are going to set for yourself. If learning how to manage your money is one of them, I’ve pulled together a bumper post of tips and tricks to set you on the right path.
New Year is the perfect time to draw a line under the past year’s financial mistakes and regrets and to learn lessons to carry forward with you. These lessons will help you kick start your finances in 2020 and make it your best financial year yet!
Think about this past year and what you felt you achieved and what areas you need to focus on.
What mistakes did you make and what lessons can you carry forward with you?
Were there areas that you saved money or areas where you massively overspent?
Self-reflection is a key part of goal setting and addressing problem areas helps you be more successful in the future.
What are Your Money Goals?
Before you can learn to manage your money better, you need to sit and think about what it is you want to achieve.
Once you have a clear vision and goals in mind, managing your money becomes much easier. It gives you a reason why, it keeps you motivated and it forces you to push onward when times get a little bit tough.
Sit down with a pen and paper and map out your goals. Writing them down makes them more real. And once you know what your goals actually are, you can formulate a plan to achieve them.
How to Manage Your Money Better
Learning to manage your money better will not be an overnight process. And it won’t always be straightforward. You’ll make mistakes – but that’s okay, we all do!
The trick is to learn from them and carry the lesson forward.
Money management is a practice and though it might not come naturally at first, keep at it and it’ll soon become second nature.
Create a Budget
You won’t get anywhere until you start a budget – sounds blunt, but it’s true!
To be able to set aside money for savings or extra cash to put towards debt payments, you need to know exactly what your financial position looks like.
And that’s why a budget is so important. It’s not there to restrict you, or tell you that you can’t spend money on x,y or z.
It’s to tell you whether you need to make cut backs or there’s surplus cash after the bills have been paid.
If you need help creating your budget, you can read my three-part series – How to Create a Budget (from scratch!)…and stick to it!
You can also sign up for my mailing list to gain access to my freebies library which includes a FREE googlesheets Budget template for you to use.
Keep a Spending Diary
After drawing up your budget, you might find that you should have money leftover after bills, but in reality it’s rarely the case.
This is quite common as frittering money away is so easily done, and though we might not think those small purchases here and there have much of an impact, when we add them all up they do.
Keep a track of what you spend – all of it. The £3 coffee here, £5 parking there. Note it all down for at least a few weeks to get the best view of your situation.
You will then be able to see exactly where you money goes – and you might not even realise just how much you’re spending until you do this exercise.
Spending diaries are a real eye opener and once you start tracking your money, you’ll be much more aware of how you’re spending and conscious of your purchases which leads to better money management.
Review Your Fixed Expenses
Reviewing your fixed expenses is equally important as monitoring how you spend your disposable income.
Direct debits, as they are taken automatically, easily slip through the net and we carry on paying them blindly without checking if we’re getting the best deal or if we could save money.
Go through your bills and make a note of when policies are up for renewal and contracts end.
Schedule some time in your diary to check every few months as circumstances change!
You might find you no longer require a particular subscription which you can cancel and save money.
Build an Emergency Fund
Even if it’s just a small one initially. Just have some savings there that are not to be touched unless it’s an emergency.
A night out is not an emergency. Christmas is not an emergency.
If your boiler or car breaks down – that’s an emergency.
Make sure you have a safety net of savings for these kind of emergencies so that your monthly budget isn’t impacted and you don’t have to resort to incurring more debt.
As your situation improves, you can increase your buffer to a level you are comfortable with.
That might be £500 or £1000. One months worth of expenses or 6 months. Whatever is best for you.
Download an auto-savings app, such as Chip* to help you stash more cash without even noticing the money leaving your account.
Be Honest About Your Debt
Be honest about your debt and write down everything that you owe. It can be a scary process, but I promise ignoring it won’t make it better and you’ll feel much better when you make the decision to take control.
Once you’re clear about what you owe, you can construct a plan to pay it off.
There are many different pay off methods and techniques (far too many to go into detail with now!) but here are some quick suggestions:
- Concentrate on the highest interest first.
- Contact your creditors and ask them to freeze or reduce the interest rates (you’d be surprised how easily they agree to this!).
- Find out if you could do a balance transfer to save on interest charges (use a likelihood tool to see what your chances of approval are before doing this – do not get into the rejection/reapplying cycle! It’ll put you in a worse position than you started).
- Build an emergency fund and stop using credit.
- Cut up your cards and close accounts as you pay them off.
- Increase your monthly direct debit payment.
- When you make savings on a fixed expense, increase your debt repayment by the amount saved – you’ll still be in the same financial position but you’ll be able to attack your debt faster.
- Side Hustle extra money to make extra payments to get that debt gone quicker!
Check Out Your Credit Score
You might not be planning to take out any credit – or perhaps if you’re saving for a house you are. But either way, it’s still important to check in on your credit score.
You don’t have to pay for your credit report – you can access it for free through any of the websites suggested here.
(It’s worth joining all of them as the information varies from agency to agency)
Check what information they have and query anything that doesn’t look right.
You can also explain unfair missed/late payments by adding an Order of Correction (read more about that here).
There are lots of ways you can improve your credit to get you mortgage ready
- Don’t apply for any credit for 6 months.
- Register on the Electoral Roll.
- Close dormant accounts.
- Don’t miss any payments or make late payments – ensure all debt accounts are paid via direct debit.
Make Extra Money
There are so many ways you can make extra money to help you towards your goals.
We all have our main jobs but there’s definitely ways you can make a little extra on the side too.
Some ideas could include:
How to Manage Your Money – Final Thoughts
If your money has been feeling a little out of control, it’ll take a while before you feel like you’re fully on top of things.
The key thing is to have patience, trust the journey and not to compare yourself to other people – we are all running our own race, just because it seems like someone else is having more success, doesn’t mean that you aren’t!
Keep going, we will get there – I promise.
If you’d like to see more of my daily finances follow me on Instagram (@katiesaves)
What is your biggest money struggle? Let me know in the comments