“Before you can trade you have to get your personal finances in order so you can build up enough capital to open a trading account. Before you can trade you must first develop the self control and discipline to earn, save, and grow enough capital to enter the game in the first place”. – Steve Burns
This is a guest post by Jennifer Scott, she can be followed on twitter at @jenniscott1390.
Taking control of your finances is one of the most beneficial things you can do for yourself. Nowadays, people around the world are more in credit debt that there ever has been before but, when you look at the statistics, this doesn’t have to be the case.
I remember when I first bought my first car on credit and I simply didn’t care. All that mattered was that I had the best car I could afford. Then the latest smartphone came out and I just had to have it. Along came the credit cards and the bank loans and, before long, my outgoing bills had reached incredible heights.
That’s not even counting the social nights out, the takeaways and meals with friends. That’s when I decided to take control of finances once and for all.
To help you wipe the slate clean and turn your life around, today, I’m going to explore with you a list of important and essential tips that can help you take back control of your life, leading to a happier, stress-free existence.
Watch Your Money
…and I mean like a hawk. Every penny that goes out of your account needs to be monitored. Where is it going? What’s it for? Is that an essential purchase? This may seem like a time-consuming chore, but it’s really not.
Thanks to mobile banking apps and the abundance of ATMs, it’s never been easier to monitor your balance. If something flags up and you don’t know what it is, question it. Maybe it’s a bill you didn’t know about or a subscription you thought you had cancelled. Whatever it is, flag it up and address the issue.
Don’t Follow the Crowds
The average US citizen is $16,883 in debt. With mortgages, this figure skyrockets. It’s important to remember that if nearly every person is in some kind of debt, then it’s normal to be in debt. Wealthy people are not normal.
I’m not saying you need to have millions in the bank to be wealthy. Instead, living comfortably and not paycheck to paycheck, without having to worry if an unexpected bill comes up is a happy life. You’re never going to be scared of what’s around the corner.
If you’re going for a meal with friends or going for drinks in a bar where everyone is flashing their credit cards, that doesn’t mean that you have to do the same.
Drinking water, drinking your drink slower or buy a more affordable drink. Just because your friends are buying bottles of champagne, doesn’t mean you have to.
Assess Each Purchase
It’s easy to think, ‘I’ve had a good month, I’ll treat myself’, but is it really worth it? Remember the smartphone I was talking about? After six months, I received an email saying the new model was available and I could upgrade. Yes, I thought, new phone here we come!
However, the more I sat and thought about it, the more I realize that I didn’t really need this phone. I didn’t really need the one that I had. Of course, businesses are going to do all they can to get money out of you.
Before making a purchase, here are a few things to ask yourself;
- Is the purchase necessary?
- Is it essential?
- Will it save me money in the long term?
- Do I have the money for this purchase?
- Will I regret this purchase?
- Could this money be spent on something more beneficial?
These are all questions you should be asking yourself, whether it’s for a pizza, an item of clothing or something more substantial. If you’ve been experiencing money problems for some time, you may already be in the habit of convincing yourself that you do need something.
If this is the case, really sit down and think whether you want something or not. It may even help to write a list of pros and cons to see if you really need it, even if it’s just for the time being so you can break the habit.
This is an essential part of managing your finances. Budgeting may take a while to get the hang of things, but the benefits completely outweigh the time spent on it. In short, it’s impossible to keep track of your money and your spending if you’re not budgeting.
Ruth S. Hernandez, the financial manager at Top Canadian Writers, shares her experience;
“Whether you’re an individual, business or a family, budgeting is so important. When I started working for TCW, the budget was all other the places with departments simply taking the money they wanted. With a strict budget in place, we able to massively expand the business and save at the same time!
When I started to budget myself, I found it incredibly difficult and didn’t know where to start at all. This way my original plan.
Step One – Income
The first thing I had to work out was how much I earned every month. This gave me my starting figure to work on. For the sake of this article, let’s call it $2,000. For you, this will include any income that you earn from your job, any benefits you claim and any other sources of income you have every single month.
Step Two – Bills
These are essential aspects of life that you’ll need to spend money on to life. These will include your rent or mortgage repayment, your utility bills, such as your electricity, gas, water and heating and the other outgoings that you pay monthly.
These include things like gym memberships, video streaming subscriptions, such as Netflix or Amazon Prime, and phone contracts. Let’s say for this article that mine came to $800.
Step Three – Dividing the Rest
After all these bills have been paid, I’m left with $1,200 for the month. The way I went about budgeting this was dividing it on a weekly basis. So, for each week, I was left with $300.
Now, I took this money and spilt it into essential purchases that I needed for the week, for example, fuel, food, transport, social events and others. I needed around $30 of fuel per week; I spend $50 on food, I would usually spend around $40 on a night with friends.
These were all estimates, to begin with. As it turns out, I was spending over $90 of food, over $50 on fuel and more like $80 on a night out. In total, this adds up to $220, leaving me just $80 a week, or $240 a month, left over.
Typically, these figures changed on a weekly basis, and I was being left with less than $50 per month. If I went over my phone contract or brought something like a new pair of jeans, this quickly left me nothing.
So, I started to stick to my budget on a weekly basis. Instead of spending $220 a month, I cut this down to my original $120. This left me $720 a month to play with. That’s after bills and all my weekly spending. Things were on the up.
Get Rid of Unessential Purchases
In all honesty, I didn’t really use my gym membership apart from the odd month here and there. So, I cancelled it. Then when I really thought about it, I didn’t really use my Netflix or Amazon Prime accounts either, only when I was bored, so I cut them off. This was saving me another $60-$80 a month, easily.
Here are some things you may consider cutting out to save you more money per month.
- Gym Membership
- Video Streaming Services
- Reducing Phone Contract Payments
- Change to a cheaper interest rate loan or credit card
- Change your home to energy saving bulbs
- Lower your hot water boiler temperature
- Cut unneeded services if you can do them yourself
- Reduce travel expenses
- Cancel any newspaper & magazine subscriptions
Of course, this solely depends on your personal situation. You may want to keep your gym membership, and you use it all the time, which is fair enough, keep it. But anything you don’t use, cut it out and save the money.
Develop a Meal Plan
For many of us, the biggest expense that we have is food, second to rent. As we all know, when you go shopping when you’re hungry, you tend to buy more than you think you need and always what you fancy at the time.
Let’s say you go to the supermarket after work and buy a pizza, some chips, some sauce and some peas, purely on impulse. This could easily cost you in the region of $30 or more!
Instead, why not spend your time developing a meal plan that you can follow. By planning your meals, you know exactly what you’re having and when, not only will you be eating much more healthily, you’ll also be saving a ton of money.
For example, buying bulk pasta, lots of veggies, tinned items and frozen food, you can get a whole basket of shopping for $30, rather than just one meal.
Prioritize Your Debts
Paying off your credit will be the biggest setback in your money management program. If you’ve got a debt of $10,000 that you’re paying off over the next four years, depending on your interest rate, you could be paying back hundreds of dollars more than you need to.
Paying off your bank loans and your credit card debt is the first step to taking back control of your finances. Once you’ve paid them off, you won’t have it looming over your head, and therefore, you’ll have a lot more money to play with each month.
This can be a slow process, especially if you are thousands of dollars in debt. However, by grinding down your debts, making sure you don’t miss payments, and paying off extra when you can, you’ll be well on your way to a happy life.
If you do have any money left over at the end of every month, put some of it towards your credit card debt. This will help it come down a lot quicker, and you’ll be paying back less interest.
Start a Savings Account
Before I started taking control of my finances, I hadn’t even thought about having a savings account. However, setting one up was one of the best things I could have done.
With a savings account, I was able to put a little bit of money aside each month which slowly built up into a couple of hundreds, a thousand and, over the years, several thousand dollars.
Now, if an unexpected bill comes up, such as my car breaking, I can easily pay to get it fixed, rather than having to scrape together the scraps of cash that I had to try and get it replaced or repaired.
Manuel K. Webb, the financial manager for Best Australian Writers, explains;
“A savings account is a must in today’s world. Even when you save up enough to buy that brand-new TV you’ve always wanted, it’s important to keep your savings for a rainy day. When that rainy day comes, you’ll be able to overcome it effortlessly.”
When looking for a savings account, look for one that gives you a good interest rate, so every year you get a little bit extra in your pocket.
One of the best things that I did was to set up a direct debit. This means every time I got paid, the money came out of my account the very next day, as though it wasn’t even in my account in the first place, making it even easier to save!
Always Remain Positive
You’ll know as well as I do that scraping by month to month can be depressing at the best of times. However, no matter what happens, always remember that everything you do to take back control of your financial situation is a set in the right direction and will be for the best.
There are going to be times where things are hard, and you may slip from time to time from your budget, but the only thing to remember is to pick yourself up and carry on from where you left off! This way, you’ll be living a happy, stress-free life in no time at all!
This was a guest post by Jennifer Scott she can be followed on twitter at @jenniscott1390 .