According to the American Psychological Association, money is one of the most common causes of stress for adults. Whether you’re struggling to get into the black, or you’re hoping to start saving more, this guide provides a step-by-step strategy to help you improve your financial situation.
Taking stock of your finances
When was the last time you opened your bank account or credit card statements or checked your balances online? If you tend to chuck letters on an unopened pile of mail on your desk, or you delete text messages about your overdraft before you read them, the first step to a brighter financial future is taking stock of your finances. Until you know what you’re dealing with, it’s virtually impossible to move forward. Take a look at every savings and checking account you have, note down how much is on your credit cards and add any loans you have taken out. If you’re up to date with your mortgage, or you’re paying a loan back and you can cover the repayments without any problems, there is no need to worry. If your debts are mounting, and it has become increasingly difficult to reduce the total and keep up with monthly bills, now is the time to take action.
If you do have outstanding debts, write down the details of each payment and creditor, so that you can see when the deadlines are, how much the total is, and how much interest you’re paying. Having everything laid out in front of you can help you make a plan and prioritize your debts.
Analyzing your outgoings
Most of us know how much we earn each month, but our outgoings are harder to track. Many of us make multiple direct debit payments every month, and when you add in contactless payments and online shopping, it’s tricky to keep an eye on where your money is going. Thankfully, there are simple ways to analyze and monitor your outgoings. You can use apps to manage your money and check your balance online in a matter of seconds. As well as helping you to understand where your money goes each month, evaluating your spending habits can also help you to eliminate unnecessary expenses and highlight areas where you could lower spending. Perhaps your food bills are going up each month, or you never realized how much you were forking out for insurance or electricity, for example.
Creating a monthly budget
Budgeting is an essential part of any money management plan. With a budget, you can control spending and work towards clearing debt or building a savings pot. Start by noting down your income and then add regular outgoings, for example, your rent or mortgage and living costs. Add one-off payments for the month ahead and then any extras you incur as you go. Your budget should enable you to calculate how much money you have available to spend, save, or put towards paying off a credit card or an outstanding bill. You can use a notepad, a spreadsheet, or an app. To make your budget work, try and use accurate figures, round up if you have to estimate, and update your plan frequently.
Asking for help
It’s very common to be in debt, but there’s a critical difference between having a mortgage or paying back a loan on time and finding yourself in a situation where you’ve got creditors calling you and you can’t see a way out. If you can’t pay your mortgage, you’ve been refused loans, or you’re putting everything on credit cards, seeking help is vital. Debts can soar in a short space of time, and taking swift action can make all the difference. Reach out to an adviser and learn about the options that may be open to you. You could take out a loan to consolidate your debt or file a consumer proposal if there’s no way of paying bills. It’s important to understand that there is help available for those who are struggling. While it can be tempting to bury your head and hope that everything blows over, this is rarely the case for money worries. Speaking out will make you feel less stressed and it can also have an incredibly positive impact on your financial situation.
Saving on a regular basis
We all have to spend money, but often, we’re guilty of spending more than we need to. If you have got a bit of extra cash available when your paycheck comes in and you’ve drawn up your budget, set up a transfer to your savings account. It’s easier to save if you deposit a lump sum on payday, but you can add to the balance if you find that you have money left over. Before you open a new savings account, do some research, and compare different banks to find the best option for you. Some people prefer to have flexible access, for example.
Setting up an emergency fund
One of the main benefits of saving money on a regular basis is being able to dip into a pot to either treat yourself or cover unexpected bills or a change of circumstances. If your car breaks down, your pet falls ill, or you need to undergo medical treatment, for example, you might be faced with a bill that comes out of the blue. Alternatively, you might wish to take a vacation, buy a new car, or give your kitchen a makeover. It’s always beneficial to have an emergency or a rainy day fund at your disposal. If you have money available, transfer a sum each month and add to your savings account when you can.
In an ideal world, many of us would like to be in a better financial situation. The good news is that even if the picture looks dire, there is a way forward. Whether you’re anxious about debt, or you’re working towards a saving goal, taking the steps outlined in this guide will help you reach your target and establish a stable, more profitable financial future.