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Money Habits You Need To Adopt Today
Being in control of your finances is such a positive feeling. There is nothing worse than wondering if you have enough money left for this week’s food shop, whether you will be able to afford Christmas presents or how far into your overdraft you are this month.
Financial peace is a goal worth striving for and it does not matter how much or how little money you make, as long as you know that you are in control of it. When you start taking your money seriously and trying to gain control of your finances, it can feel a little bit daunting or even overwhelming for some people, but remember it is not an overnight process.
Becoming better with money is a habit you need to practice and the more you do the better you will become at it.
If you have debt, are worried that you don’t have enough money coming in to cover what is going out, you might feel like it is all out of your reach, but it isn’t. You can make small positive steps toward gaining control today.
I have been working on my money mindset for years and I am still constantly improving. The only difference is I don’t worry about money anymore. We are living on the least amount of money that we ever have (one part time income) and yet we are still not struggling. We know exactly what we need to cover our basics and we have some money in savings should we ever need it. I’m not saying this to brag (believe me, I probably earn less than the majority of people reading this) but to show that income really isn’t an excuse to be bad with money, it’s really how and what you do with it that matters.
And it’s all down to adopting good money habits. Remember the more you practice, the better you’ll become!
Set up a standing order to your savings each month and treat it like a bill, don’t see it as your money but as an expense to pay out. Set a savings target for this fund and only dip into it for emergencies. If your car breaks down and needs repairs and you can’t cashflow it – use your emergency fund.
If you need a new outfit for a party and you can’t afford it – tough. Be clear in your mind what the emergency fund can and cannot be used for. Once it’s at an acceptable level that you are comfortable should an emergency arise, then you can focus on building your other savings and working towards other goals.
You might also like this post: Why an Emergency Fund is Important and How To Build Yours Quickly
You can read how to create a budget from scratch here (part one), here (part two) and here (part three). Before payday each month I draw up a completely new budget for the month and tell all of my money where to go. I know what’s coming in and what’s going out and how much we have for variable expenses such as food and fuel and what’s left over for fun. There’s (usually) no surprises, but if there is it gets flagged for next month.
Having a budget means that when you check your balance and see £250 you know that you actually only have £100 because that direct debit for £150 still has to come out. It keeps you living within your means. It’s not an exercise in restricting yourself, but ensuring that you’re not relying on credit cards and overdrafts just to survive.
Make sure as many of your bills are paid by Direct Debit as possible. All of my fixed outgoings are paid by DD so I never forget to pay something or pay something late. If you have a credit card, set up a DD for the minimum payment (or a fixed amount more if you can afford it) to ensure that you never miss a payment and negatively impact your credit history. You can always make adhoc additional payments (and you should strive to do so as much as possible) but at least with a DD in place you are always covered.
I check my banking app every morning to make sure that the balance is what I am expecting it to be. I check off (either physically on paper or on my spreadsheet) items that have gone out and make sure everything is as it should be. Doing this daily allows me to flag any potential issues before they become a problem.
It’s so easy to overspend when you can literally tap your card to pay for something. Paying by card, or even using your phone makes it so simple for us to spend and without handling the physical cash, it’s easy for us to lose sight of just how much we’re spending.
As part of your budget, you should have some variable spend categories. At the start of the month withdraw this money in cash and divide it up between your envelopes. I fill my envelopes weekly so I don’t have too much cash on me at any one time.
The beauty of cash envelopes is not only are you physically handling the money so you’re very aware of what you’re spending, you also have a set limit. So if your grocery envelope has £70 in it, you can’t spend £74 because you physically don’t have the option.
You should set yourself financial targets each month and challenge yourself to achieve them. It could be ‘make an extra £100 this month’ or ‘reduce grocery spend by 10%’. We treat new months as fresh starts and often tell ourselves things like ‘I’m going to go to the gym twice a week, every week this month’. Financial goals should be on your radar too.
When you buy something, get a receipt – this will help you to track your spending and have a clear visual of where your money goes. You can also put these receipts to good work with apps such as Shoppix and Receipt Hog where you earn points for scanning your receipts, which can then be converted to cash.
Don’t just do this annually or when contract renewals come around. Review each of your fixed expenses every couple of months to make sure you are still getting the best deal. You might be in a contract, but sometimes it is worth paying the get out fee and moving suppliers to save more money in the long run.
You might also like this post: Why You Should Regularly Review Your Expenses
We always end up with cash strewn about in various places – handbags, kitchen drawers, coat pockets, the car. Have a jar where these loose pennies go and regularly count it up and bank it. It might not seem like a lot but you’ll be surprised how quickly these small amounts can add up. Make your money work for you.
This applies to all aspects of spending. When grocery shopping consider whether it would be cheaper to change supermarkets. Mysupermarket.co.uk allows you to compare shopping baskets and see whether you could save by switching.
Consider whether you could switch brands and save money. Do you need Heinz Beans? Or could you swap to Smart Price and save the extra money?
When your car insurance comes up for renewal can you save money by moving to a new insurer?
Argos have 3 for 2 on Toys which seems like a good deal. But can you find that toy cheaper elsewhere? Don’t assume because something has DEAL!!! Written all over it that it is.
I started Katie Saves while on Maternity Leave to document our adjustment to living on less. Now back in work - I blog about making extra money, saving money, getting my life organised and being a new mum. Join me!