Money can be a complicated topic. It’s not something that a lot of people want to talk about. For that reason, a lot of people aren’t sure where to start when it comes to managing their money. You can learn more about things like loans to help you get back on track financially if you haven’t been managing your money well up until now, but you don’t need a loan in order to spend wisely going forward.
Thankfully, you don’t need to be the world’s greatest expert in personal finance to manage your money well. It just takes making conscientious decisions about where you spend your hard earned money. With that in mind, here’s our guide to spending money wisely to help you out!
Always Have a Plan
If you are well prepared, you are more likely to be successful. The same thing is true when it comes to spending your money. If you have a financial plan in place then you will know exactly how much money you have left over after you pay for things like bills. It will help you to save and to do the things you want to do without putting yourself in a bad position financially.
It can help to open up a spreadsheet and make a list of your incomings and outgoings. This will help you to realize where you are spending unnecessarily. Make a budget too. Divide your money into sections – bills, savings, daily expenses and personal money. This will help you to keep track of everything.
Review Your Expenses
How much do you really know about where your money is going? Most of us don’t give our bills much of a thought until it’s too late.
It’s for this reason that it’s always a good idea to review your expenses. Write a list of everything that you are paying for and how much you are paying every month. Consider if there’s anything on that list that you can cut out. Do you really need that membership for the gym that you never use? Consider all of the things that you don’t really need and cut them out – it’ll help you to save a lot of money.
You don’t need to cut things out entirely to reduce your expenses, however. You should also spend a little bit of time hunting for some bargains. Is there any way that you can reduce your monthly expenses, perhaps by calling the provider and asking for a rate that would be more preferable? Could a competitor give you a lower rate? See if there are small ways that you can cut costs in those big monthly bills.
Save for Short Term Issues
You should try to avoid situations where you are relying on your credit card for emergency situations. Instead, it’s always a good idea to have an emergency savings account that you can rely upon for those unforeseen circumstances where you need to blow a lot of money in one go. Most experts will suggest saving between three to six months of living expenses for a rainy day. This way you aren’t caught out if anything happens.
Be Careful With Loans and Credit Cards
A credit card or a loan is very beneficial, especially if you are trying to build up your credit score, but you need to be careful about how you use it. Make sure that you are always paying any bills on time though, otherwise it will have a negative impact on your credit score. You should be looking at the ratio between the debt that you owe and the amount that you are able to borrow. The number should remain at less than 30% to keep a healthy credit score. Pay things back on time and keep an eye on your outgoings and you should be fine!
Do Nice Things For Yourself
This may seem like a weird piece of advice. After all, you’re trying to reduce your expenses right? Well, yes. It’s important to limit unnecessary expenditure, but complete deprivation from anything fun is not going to help either. If you keep on denying yourself anything that you enjoy, then eventually you’re going to cave in and spend a lot more money on unnecessary things.
You can only have so much willpower before you are going to cave. It’s a little like dieting – constant deprivation can lead to binge eating. The same can be said for your finances.
The best thing to do is to make sure that you set aside a little bit of money every month for things that you enjoy. This can be for material items, food or trips away. Life is for enjoying, so allow yourself to have the little pleasures!
We live in an age where you can pay for things with just the push of a button, meaning that it can often be difficult to resist temptation. Credit and debit cards can be a tremendous help, but they can also be a curse. If you struggle to keep control over your spending money, then it may be time to switch to using cash for certain things.
Some studies have suggested that people will spend more money when they buy things on a card in comparison to using cash. When you see the physical results of your expenses in dollars and cents, you may be less eager to hand over the cash. You can use this cash as your spending money, and use your card solely for bills and savings. This can help you to reduce temptation and manage your money much more easily.
Managing your money doesn’t have to be difficult, though it can certainly be complicated at first. By following the tips mentioned above, you will have a much easier time managing your money. Of course, it’s always a good idea to speak to an expert if you are still struggling. An expert can help you to create a personalized budget that will work for you.