Wise financial management requires a series of daily choices. Take control of your financial situation with our money budgeting tips and learn how to calculate net worth, create a budget, monitor your progress, manage the flow of income and expenses, and protect your assets. After all, no one cares more about your money than you.
The first step to taking control of your finances is doing a budget.
It will take a little effort, but it’s a great way to get a quick snapshot of the money you have coming in and going out.
Setting up a budget means you’re:
Less likely to end up in debt
Less likely to get caught out by unexpected costs
More likely to have a good credit rating
More likely to be accepted for a mortgage or loan
Able to spot areas where you can make savings
In a great position to save up for a holiday, a new car, or another treat
If you’re spending more than you have coming in, you need to work out where you can cut back. This could be as easy as making your lunch at home, or cancelling a gym membership you don’t use. You could also keep a spending diary and keep a note of everything you buy in a month. Or, if you do most of your spending with a bank card, look at last month’s bank statement and work out where your money is going.
Some people find it hard to get motivated about saving, but it’s often much easier if you set a goal. Your first step is to have some emergency savings – money to fall back on if you have an emergency, such as a boiler breakdown or if you can’t work for a while. Try to get three months’ worth of expenses in an easy or instant access account. Don’t worry if you can’t save this straight away, but keep it as a target to aim for. The best way to save money is to pay some money into a savings account every month.
Savings (for your emergency fund and for investments) must be deducted FIRST from your income; whatever is left may be used for expenses. Most of us live the other way around — spending first, then parking the remaining money in investments. Ideally, 30 per cent (or more) of your income — whether you earn a lot or a little — must be saved. If that seems impossible, step it up slowly. Start by saving at least 10 per cent of each pay-check and keep increasing this every quarter.
If you find that you need help with your finances, professionals such as tax advisors, credit counselors, financial planners, and lawyers can help. Before working with any financial professional, be sure to check their credentials. You may choose to ask your friends and family if they have any trusted financial partners that they recommend. Ask specific questions about their history and areas of expertise. Finally, be sure that you are comfortable with the advisors you choose; ideally, you will be financial partners for life.