Future proofing your finances: The beginners guide to money management
It’s not how much money you make, it's how you manage your funds that will bring you happiness. Many of us think the more money we're earning, the happier we’ll be, however, that’s not true. If you're excessively spending money and leaving yourself short every month, how will you be happy? That can only create stress and worry.
Skills such as budgeting, investing for the future and understanding the correct use of credit cards are rare skills for some people. So, for those of you who need a little help with your finances, we're here to help.
Tip 1: Budget your money
Living within your means is easier said than done. If you're consistently spending more than you earn, you’ll end up in a spiral of debt and will never be prepared for emergencies or huge life changes.
Whereas, if you spend less than you earn it allows you to have the freedom to save, prepare for the future and deal with anything in life. The bigger gap you have between your income and your spending, the better off you’ll be. Technology can be a great help for those of you who struggle to budget. You can opt for a simple spreadsheet or use a budgeting app for a helping hand.
Tip 2: Always plan for the future
This doesn’t just mean your retirement. Establishing an emergency fund will help you when it comes to unforeseen circumstances. Being well organised with your money in time for old age is particularly important because you'll have an increased risk of illness that might make managing your money difficult, if not impossible.
Planning for the future will allow you to arrange and finance long-term care for yourself and cover your funeral costs. Funerals can be expensive so by regularly putting money into a savings account it can prevent these costs becoming a burden to your family.
With a funeral plan, you pay instalments to a provider who invests your money and then uses it to cover the costs of the funeral. A funeral comparison site can help you find a local undertaker who will take care of the funeral for a good price.
Tip 3: Track your cash flow
You need to know what your cash flow (the money coming in and out of your accounts) looks like. Start off with your income and take a look at your usual take-home pay. Next, you need to start tracking where your money is going by reviewing your bank statements and checking receipts. Then, arrange your purchases as following:
- Living expenses: These are the same expenses each month such as your rent, insurance, car payments etc...
- Necessary costs: These are expenses such as utilities, gas, food shopping budget.
- Other spending: This is your non-necessary spending such as personal care, entertainment, eating out and so on.
Tip 4: Pay bills on time
Once you know how much money you have coming in, where it’s going and in what amounts, create a list of the bills you need to pay each month. This way, you can make sure you don’t miss a payment.
Making payments on time is the best way to build your credit. It will keep you from late fees, overdraft fees or penalty charges. And more importantly, paying your bills on time will lessen your overall financial stress.
As you continue to manage your money better, the benefits will extend a lot further than just your bank account. By saving up, you will have more financial freedom and, hopefully, fewer money worries.