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Managing your money is what I like to talk about the most. I’ve never had a lot, but when I was a single mum in my early 20’s, I had to quickly learn how to get by on what I had. I navigated debt, bereavement and having to deal with getting a small promotion that made me lose my benefits and left me financially worse off! Trust me, I’ve been through it all and I’ve learnt a lot since then.
For me, there are a few money rules that I live by but there a 4 important rules you need to consider if you want to get better at managing your cash. Even if you’re not in a situation right now that requires you to careful watch what you spend and how you spend it, you never know what might be around the corner. The best advice I could give to my past self would be to start taking care of my finances before they even needed any consideration. As soon as you’re earning, start planning ahead.
Have an end date in mind for your debt
Debt is something that sometimes can’t be helped. I know all the big players in personal finance tell you to never get into debt in the first place, I can’t help but feel that’s a piece of advice that comes from privilege. The thing is, it doesn’t even matter how you got into debt in the first place, but you’ll always have more money if you get out of it quickly.
While it’s sound advice to overpay and pay off as much as you can, if you’re struggling, it might feel entirely impossible – especially credit card debt, which can feel like it’s endlessly racking up and you’ll never pay it off. If you’re in a position to commit to paying more than the minimum, then work out how long it’ll take you to get do that and write down the date. Working towards a debt end date is great motivation to get the balance cleared.
Otherwise, you might have something like a debt consolidation loan, which will have its own end date on it. You should never take out any form of debt without doing your research or getting advice, and you should always attempt to learn more before committing.
Whatever types of debt you have, you should always work out an end date for it. If you’re fortunate enough to increase your earning during that time, it’s worth attempting to bring the end date sooner (depending on what your agreement with the lender is).
Keep a separate holiday and emergency fund
I know this sounds like it should be obvious but I know loads of people who use the money from their emergency fund to go on holiday on a whim. Your emergency fund should be just that – for emergencies. If you think the pot has got big enough to stop paying into it, then that’s fine. Whatever you do, don’t use that money for a holiday.
Instead, have a separate account for holidays and pay into both. If your emergency fund reaches an amount you are comfortable with, you can always start putting a bigger share into the holiday fund and stop adding to the emergency fund. This is a much better way to plan your finances and even covers you for financial emergencies when you’re abroad.
An all-round sensible option!
Budget no matter what state your finances are in
Even if you’re doing well and have plenty of cash, you could have more disposable income just by looking after it better. For starters, people who feel like they have more than enough money tend to waste it needlessly. Even something as simple as buying expensive foods from the supermarket then letting them go off is a common way of wasting money.
Plan your food for the week, make a shopping list and a shopping budget then stick to it. That way you won’t overbuy, and you’ll have more money in your pocket.
Always audit your banking
I try to audit my spending every month. There are apps that can do this for you, but I prefer not to spend money on something I can do myself. This helps you check you’re not paying for things you don’t need. If you’ve spent the last 5 months paying for a gym membership you don’t use, then cancel it! If once month you spend £200 on takeaway, maybe reassess how you shop for food (or ask yourself if it was a special circumstance.
My advice would be to look at your banking app thoroughly at the end of every month and see where your money is going. Check all standing orders are entirely necessary, and adapt your spending if it turns out all your cash has been spent on something outrageous, like pizza. You’ll save money by not subscribing to an app that does it for you, and you’ll have more cash in your pocket after changing your spending habits!