Our personal finances are an area that many of us tend to neglect. It’s never too early to start being financially savvy, while at the same time it’s never too late, either. Whether you’re just about to leave University and are starting to think about saving to buy your own home, or you’re in your late 20’s or early 30’s and feel like you’ll never be able to buy a property. Even if you’re in your 40’s or 50’s and would just like to get better at managing your finances, this is the article for you.
Use this article as a checklist to help you get your finances in order, whether you have your eye on buying a house, you want to save towards a once in a lifetime family vacation, or you are considering how affordable a personal loan could be for you.
Step 1: What do You Want to Achieve?
We’re more focused when we have goals. That’s just human nature.
Whether you’re dreaming big and are visualising your sprawling property in the suburbs, or you simply want to feel the security of having money saved in the bank should you need it, you need a finance goal to help focus your mind.
Whatever you ultimately want to achieve, the best approach to take is to start with smaller goals. These will be easier to do and help you feel motivated. For example, if you want to save $30,000 over the next five years to use towards a mortgage deposit, think about the ways you can break this goal down:
Saving $30,000 sounds like a huge goal. Yet, broken down to $16 a day, suddenly it seems like quite a trivial amount of money.
What is your goal?
Step 2: Tracking What You Earn vs. What You Spend
The key to saving is ensuring you have the cash to be able to do so! In order to get an idea of where you’re currently at with your finances, you need to get some idea of what you’re spending each month in comparison to what you earn.
You have a couple of options for doing this.
Option 1: Do it manually, either writing down your spending or inputting what you’ve spent into an Excel spreadsheet. If you tend to spend using your debit card, you can go through old bank statements if you wish.
Option 2: Download a finance app that allows you to input your spending. Many of these apps will work as a budgeting tool, too, and we’re going to look at some tips for budgeting next.
For now, though, what apps are available that might help you track your spending and get an idea of how you can start to change your spending habits?
Step 3: Setting Your Budget
Once you have worked out what you’re spending, it’s time to set a budget that you’re going to commit to. Depending on the outcome of your calculations, you might find that you need to change very little in order to be able to save or meet whichever financial goal you have set yourself. Likewise, you may find that you need to make some fairly dramatic changes to how you approach your spending.
If you’ve used any of the suggested apps above, they will all help you with budgeting, so you can make changes based on what you learned from using them. Alternatively, you can sit down with your own sheet of paper or digital spreadsheet and lay out exactly what your budget per category is going to be.
What are the golden rules that will help you with your budgeting?
Step 4: Going Further than Budgeting
If you’ve budgeted every last dollar and still aren’t able to meet your savings goal, don’t worry. You have a range of options that could help you both in the short term and the long-term.
Making More Money
Consider your options for making more money, both immediately and in the months and years to come:
- Do you have a spare room you can rent out?
- Are you able to take on a second job?
- Is there any training available that would gain you extra qualifications and thus help you get promoted at work, or get a better paying job?
- Do you have any old belongings you could sell on eBay or at a local market?
Becoming a Bigger Saver
In addition to your opportunities for making more money, you could also look at ways to push your saving even further:
- Can you host social occasions at home instead of going out?
- Are there any coupons or discounts available at the places where you shop?
- Go “hardcore” for a month or two and do not spend any money on anything but essentials, then build this spending back in based on the things you really missed.
Step 5: Keep a Separate Savings Account
Earlier, we talked about treating your regular savings goal as if it was a bill. The final part of doing that is to ensure you have a separate savings account set up, and a direct debit or standing order instruction to ensure your saving amount is paid into the account each month. As an added protection against yourself, we recommend opting for a savings account that can be quite difficult to withdraw money from. An “instant access” savings account isn’t a great idea if you’re worried about your financial self-discipline. If you actually have to go to a branch of the bank when you need to withdraw money, even this small additional effort will make you think of your reasons for saving, and can be a great protector against any impulse buying, too.
Sticking to Your Plan and New Financially Savvy Attitude
It’s now down to you.
Remember to not be too hard on yourself. Try and give yourself a treat every 2-3 months if it keeps you motivated, especially if you are going “hardcore” and depriving yourself of all luxuries and disposable spending in order to meet your savings goals.
Your new financially savvy outlook may seem difficult to maintain at first, but once you see the huge difference it can make to your life, you’ll wonder why you haven’t had this attitude for years!
Disclaimer: This article contains general comments and recommendations only. This article has been prepared without taking account of your objectives, financial situation or needs. Before taking any action you should consider the appropriateness of the comments made in the article, having regard to your objectives, financial situation and needs. If this article relates to the acquisition, or possible acquisition, of a particular credit product you should obtain and consider the relevant disclosure documents before applying for the product.