Getting in control of your finances can seem daunting, but it is an excellent way of increasing your financial security.
Using these eight simple steps to manage your finances can help you gain greater control of your money, your credit, and your debt.
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Spend Less Than You Can Afford
By spending less than what you can afford, you can get behind your own earnings power and start to generate savings.
Set out a realistic budget that you can stick to and save money every month.
On average, it can take 66 days to form a habit, so by following this strictly, you’ll get used to putting away those savings and adjusting that budget.
Understand Your Spending Habits
To understand your spending habits, you’ll need to start tracking them.
Write down what you spend each month and review it at the end of every week to see where you can cut back.
Place the focus on cutting back things that don’t matter to you and spending money on the essential items or things you enjoy.
Make Your Payments Automatic
Setting up automatic payments has two benefits: one, you won’t have to think about what is coming out of your account, and two, it’s far easier to track your finances.
You can avoid penalties or late fees by setting up automatic payments on the same day each month to repay credit cards or more substantial purchases.
Invest In The Big Things Wisely
If you’re buying a big, essential purchase, like a house or a new car, you don’t have to spend the maximum of what you can afford.
By planning what regular repayments or the expenditure would look like as part of your monthly budget, you can work out a realistic figure for what you can spend.
Avoid Credit Cards and Overdrafts
If you can’t pay off your credit card purchases each month, you should avoid them altogether.
By frequently overspending, then taking a long time to pay the debts off, you’re overpaying for the original item, and it’ll affect your finances as a result.
Only buy what you can afford to pay off each month.
The same goes for overdrafts; try to reduce them as much as possible and avoid dipping into them each month.
Know Your Credit Score
The better your credit rating, the less you’ll have to borrow on your big purchases, from your mortgage to car repayments and most types of loans.
You can build up your credit score by using a credit card, but only if you pay off your purchases each month.
Order a credit report or complete one online, and make sure any errors are also corrected.
Savings Mean More Than Salary
Your monthly income can change rapidly, and having an income without savings can leave you vulnerable to any unexpected outgoings.
If your financial situation does change, what money you have squirrelled away will matter more than how much you earn each month.
Be prepared for your boiler breaking or your situation changing with some additional savings.
Save Before You Invest
The best investment you can make is frequently saving money.
Investments are great in theory, but there’s no guarantee that your risks will pay off.
Saving at a higher rate rather than spending more money on investing is a guaranteed way to build up your safety net for any change in circumstances or unexpected expenses.
Investments are not a good idea if you can’t afford to lose any money in the short term.
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