With the New Year approaching, many of us will be putting some thought into what we would like to change and improve over the course of 2020. For some, it will be to achieve weight loss and fitness, or relationship goals. However, one of the most common parts of our lives that we want to enact change in is our personal finances. Having a broad goal like, ‘Be better with money’ is almost impossible to achieve. Without breaking down how you are going to get there, it will feel unmanageable and you’re far more likely to give up in the first few weeks. Instead, use the tips below to break down managing your personal finances. Before you know it, the new spending habits will become second nature.
Interest
This is absolutely something you should be paying attention to if you want to address your finances. Thinking about which credit card to pay off first? The one with the highest interest rate. Opening a savings account? You want the one which will give you the most interest. Taking out a loan or re-mortgaging? Look for the lowest interest rates available. Check out how to calculate interest if you aren’t sure, but it’s worth thinking carefully about the rates of interest and taking action if you realise you’re paying above and beyond what’s standard.
Budget
This is the first step to successfully managing your personal finances. You need to make a budget and stick to it. There are many resources online that can assist you with how to make a budget, but it will essentially involve outlining your ingoings and outgoings.
Include Spending Money
We’ve all done it – gone on a spending spree and then vowed to cut up our cards and never spend money again. But, although this type of militant approach works for some people, it’s not a healthy way to manage your money and you might well end up rebelling and spending even more. Instead, give yourself an allowance of approximately 30% of your salary. This should still leave you with enough to pay your bills and other necessities but will give you the freedom to go out for dinner, to the cinema or get some new clothes. It also means you can save up for something bigger if you want to.
Keep a Money Diary
Although it might seem tedious, writing down what you spend on a day-to-day basis is one of the most useful ways to realise where your money is going. Is that Uber that you’re telling yourself is a one-off actually happening once or twice a week? Do you have a coffee buying habit that started as an occasional treat but has become standard? It’s worth looking at where your money goes because then you can take Steps to Curb Your Spending. Awareness of a pricey habit is half the battle to taking greater control over your finances.
Little and Often
If you know there are things you need (or want) to save for, setting up a separate bank account to divert a few pounds a week into can be a really beneficial way to save without feeling the pinch. Transferring a fiver on a weekly basis will be an amount you probably won’t notice leaving your account and can quickly add up to more substantial sums.
However good you are with money, it’s always worth using the New Year to bring in some habits that will help you achieve your finance goals. Awareness of your spending habits and little tips that won’t make too much of an impact are a big part of successful spending and saving.
