Financial management is a critical life skill. From paying bills to saving up for emergency expenditure, there are a number of financial processes you need to engage with in order to prevent problems further down the line. Unfortunately, many people feel unequipped to deal with the challenges of running their finances effectively. Particularly with the rising cost of living, and increasing pressures on salaries, the emphasis on better financial management has never been greater. By becoming a better financial manager, you can save money on the cost of your monthly outgoings, while actually building up the savings you know you need for the future.
1. Know What You Are Earning
This one seems pretty easy, but you would be amazed by how many people are unaware of their total incomings in the month. For most people with day jobs, there will only really be a couple of different sources of income, so tracking this – even across two partners – should be straightforward enough. For those who are self-employed, this is more difficult, especially if you have several businesses. Your earnings may also be variable, so it’s a good idea to look at the average figure over a period of years or months.
2. Know What You Are Spending
This is a more important point for most households, because this is where the greatest impact can be made. It is far too easy to overspend when you don’t have a firm grasp on your household budget. Know what you are spending on different areas of your life, from essential, domestic expenditure to leisure and recreational spending. It all adds up, and you can only start to make savings on your bills when you have a good idea of what you are spending at the moment. Note down everything that comes out monthly on a spreadsheet, so you can keep track of each item and the total. This also allows you to track how much you have saved each month, so you can monitor your progress.
3. Compare And Switch On Household Bills
Household bills are a large part of the puzzle when it comes to spending. Most of us have a number of different suppliers, responsible for providing services to the home. These suppliers can all be compared with other suppliers, and in many cases you can find cheaper services elsewhere. Broadband, gas, electricity – whatever the bill, there are always advantages to comparing different providers to see what they have to offer. Where necessary, you should be prepared to switch your provider for a cheaper alternative. That means you can save money this month and in future months, for no loss of service. Try to compare every individual household bill you pay, to see if savings can be made.
4. Buy Sensibly
Shopping is something many of us enjoy, whether it is for clothing, household, groceries or luxury spending. Whatever you are buying, it is essential to make sure you buy sensibly, and in a way that lends itself to keeping the costs of the purchase low. For example, if you buy groceries daily, you are spending too much money. Buy weekly, or even monthly. The more you can buy in bulk, the better the savings can be. Don’t just buy without engaging your brain – think about what you are spending, and whether there is a cheaper way for you to get the same or similar goods for less.
5. Invest Safely For The Future
With the money you save from unnecessary and wasted expenditure, you should look to invest as quickly as possible in some secure, stable way. Avoid high-risk investments, or anywhere that could potentially lose you money. Unless you understand what you are getting into, it is best to steer clear of sophisticated investment choices. Certificates of deposit offer a secure alternative, with guaranteed returns for peace of mind. Comparing todays CD rates allows you to find the best deal.
It doesn’t have to be a complicated process. While the terminology may at times cause confusion, it is essentially all about keeping a close watch on what is happening to your money. Diligence is most of the work, while an arm’s-length perspective is helpful for future planning. By managing your finances better now, you can start optimizing your arrangements for a more profitable future.