Making the decision to better manage your finances is not always an easy one. For many of us, it comes after many unpleasant money experiences, money mistakes, struggles and the realisation that we live pay-cheque to pay cheque, that is, we are a pay cheque away from bankruptcy.
If you haven’t had any bad money experiences and have not experienced lack at any point to get you thinking, here are some questions to ask yourself that may create an aha for you.
Do you know whether you have a positive or negative monthly cash flow?
Do you know what your net worth is?
When you look at your personal finances, are you where you want to be with your finances?
If your answer to any of the above questions is ‘no’, then, you are in the right place. This article is going to help you manage your money better to enable you get to where you want to be.
Are you tired of stressing about money all the time? Grab Our Free Financial Success Pack and take charge of your financial ย health now.
Remember, it is never too late to make improvements. All you have to do is start. No matter where you are at in your financial journey, whether you are a savvy money manager or you are at a stage in your life where you are all confused and wondering where to start, it doesn’t matter, there is always room for improvement.
๐ฑย ๐ช๐ฎ๐๐ย ๐ง๐ผย ๐๐บ๐ฝ๐ฟ๐ผ๐๐ฒย ๐ฌ๐ผ๐๐ฟย ๐๐ถ๐ป๐ฎ๐ป๐ฐ๐ฒ๐
To begin your journey to financial health, here are 5 Strategies that you can implement, exactly how to implement them and the impact each has on your finances.ย By the time you finish implementing all 5 steps, you will have a clearer picture of where you are with your finances. You will be inspire to take the next steps and consistently make progress to where you want to be with your finances or what you want to achieve.
BUT before we get into discussing these strategies, first, let’s take some time to learn how to manage money wisely.
a) Identify Your Financial Goals
When getting started with managing your finances, the very first thing to do is to identify what your financial goals are. You have to identify what your financial goals are because that is the only way you will know what steps and what direction you want to move in.
So take the time to identify what your financial goals are. It is a rewarding process:
- Do you want to pay down debt?
- Do you want to save up money for your kids college/university?
- Do you want to pay into your pension?
- Do you want to save up for a deposit for your own home
- Do you want to retire early?
- Do you want to build an emergency fund?
- Do you want to build invest and build wealth?
When starting out, the steps you take towards managing your finances effectively are the same but as you progress, what goal you have determines the very specific steps you take to achieving that goal.
b) Identify What Tools You Need
Going through your financial journey to achieving the financial health you want will require you using the right tools. You don’t have to have everything in one go. It’s about identifying what you need at each stage, acquiring them and progressing to the next step.
You will have to find the tools financial tools that work best for you. Budging is a big part of your financial journey. You will need to find both the budgeting style and the budgeting tools that work best for you. They can range from a simple pen and paper budget solution, try these free monthly budgeting sheets as part of our Free Financial Success Pack.
If you are the type that is moving in line with technology and will like to manage your budget on the go within your phone in an app, there are some really good free budgeting apps out there that will work perfectly for you. Some come with free current accounts that will offer much more than just work as a budgeting app. One of such apps is the Revolut app
which allows you spend even abroad with ease without charging you any exchange charges and helps you track and analyse all your spending in detail. It also allows you round up your card payments and save up the spare change which is another easy way to save money.
c) Keep your motivation alive
Learning how to manage your money takes time and effort. As you journey along, you will experience tough days. Ensure to take steps to stay motivated so that you don’t slide back to those old habits. You can do that by reminding yourself everyday why you started this journey in the first place. Writing down some Affirmations and saying them each day will help you stay motivated.
Now will be a good time to take a look at our 30 Empowering Money Quotes That Will Inspire and Motivate You.
d) Ask For Help
One of the challenges people face as they embark on their financial journey is that they get stuck because they feel shame to let any body know they are struggling, think its a taboo to talk about their money mistakes, think they need huge amounts of money to make any significant change in their financial situation. All these are in our minds.
There are other really important things that relate to finances that may just come up and things may become better than you think, for example, you could be able to make tax saving, save more into your pension pot or identify strategies to pay off debt.
Don’t hold back, talk to somebody. You can reach out to us at info@mysavvyfinance.com
Now that you are better positioned to dive in, here are the
5 Simple Ways To Manage Your Money and Improve Your Finances
Now that we have the basics of how to manage money wisely out of the way, lets get down to the 5 strategies to manage your money and improve your finances.
1) ๐ง๐ฟ๐ฎ๐ฐ๐ธย ๐ฌ๐ผ๐๐ฟย ๐ฆ๐ฝ๐ฒ๐ป๐ฑ๐ถ๐ป๐ด
This is simple, but many of us donโt do it. Itโs down to recording and observing what you spend your money on. What does your money do?.
Record everything in one place. You can use a spreadsheet. To start out, nothing complicated. These days, the banks have made it easier for everyone, you can now download your bank statements in Excel format. If you do that, all you have to do is categorise them and break them down into different income and expense categories to see exactly where your money goes. You will be surprised at what you find.
On the other hand, if spreadsheets is not your thing, don’t worry, just grab a journal, together with your bank statements and simply just begin with the month just ended. Go through and use the journal to record your expenses in categories. In fact, this is my favourite way of doing it, it actually brings out the emotion when you do it.
When you are all done, Observe.
To observe: Go through the recorded transactions every now and then – once per day – at the end of the day. Look for any patterns. These patterns will help you as you continue on your money journey.
Other ย ๐ช๐ฎ๐๐ย ๐ข๐ณย ๐๐ผ๐ถ๐ป๐ดย ๐๐
If you are very technology savvy, then a budgeting software will do the magic. With that, things are kind of automated and you donโt have to worry about writing or recording them manually. ย It takes the pressure off as the software downloads and categorises the transactions on your credit card and other accounts so that its easier for you to observe, BUT, it may take the emotion away.
๐๐ผ๐ย ๐ฑ๐ผ๐ฒ๐ย ๐๐ต๐ถ๐ย ๐ฝ๐ฟ๐ผ๐ฐ๐ฒ๐๐ย ๐ถ๐บ๐ฝ๐ฟ๐ผ๐๐ฒย ๐๐ผ๐๐ฟย ๐ณ๐ถ๐ป๐ฎ๐ป๐ฐ๐ฒ๐?
Many people think they are aware of what their money does without intentionally tracking it.
Once you start recording and observing your transactions, you may be surprised at where your money goes. It is this first step that will help you take many more steps especiallyย ย if you are interested in getting into budgeting.
Tracking your spending will also create a certain level of awareness in your subconscious and you start being accountable to yourself, something that may not have existed before.
That will change your spending habitsย ย considerably as that awareness grows.
2) ๐๐ฟ๐ฒ๐ฎ๐๐ฒย ๐ย ๐ฃ๐ฒ๐ฟ๐๐ผ๐ป๐ฎ๐นย ๐๐ฎ๐น๐ฎ๐ป๐ฐ๐ฒย ๐ฆ๐ต๐ฒ๐ฒ๐
A balance sheet is a two-column list of all of your assets ( right column) and all of your debts (also called liabilities) on the left column with their amounts.
You will be able to calculate your net worth from your balance sheet – net-worth is the total amount of money to your nameย ย and can be positive or negative.
Your assets will include the positive balances in your bank accounts, your investments, and property ( any items with a resale value).
Your debts include your mortgage, student loans, credit card debt, car loan, etc.
A balance sheet is a snapshot of your entire financial life in just about the most summarised form possible.
๐๐ผ๐ย ๐๐ผย ๐ฌ๐ผ๐ย ๐๐ฟ๐ฒ๐ฎ๐๐ฒย ๐ย ๐๐ฎ๐น๐ฎ๐ป๐ฐ๐ฒย ๐ฆ๐ต๐ฒ๐ฒ๐
The easiest way to create a balance sheet is to use a spreadsheetย ย but like I often say, you donโt have to. You can use a simple paper and pen in a note book.
For each line, enter/ write the type of asset or debt, the company itโs with, and the current balance.
To calculate your net worth, it is simply;ย ๐ง๐ผ๐๐ฎ๐นย ๐๐๐๐ฒ๐๐ย –ย ๐ง๐ผ๐๐ฎ๐นย ๐๐ฒ๐ฏ๐ย (ย ๐น๐ถ๐ฎ๐ฏ๐ถ๐น๐ถ๐๐ถ๐ฒ๐)
If you want a more details overview of how to create your own personal financial statements, visit out blog post – Accounting 101 โ Understanding Your Personal Financial Statements Here
๐๐ผ๐ย ๐ช๐ถ๐น๐นย ๐ง๐ต๐ถ๐ย ๐๐ ๐ฒ๐ฟ๐ฐ๐ถ๐๐ฒย ๐๐บ๐ฝ๐ฟ๐ผ๐๐ฒย ๐ฌ๐ผ๐๐ฟย ๐๐ถ๐ป๐ฎ๐ป๐ฐ๐ฒ๐
As mentioned earlier, this is usually the first step that creates financial awareness for most people. This may be the first time you have traced all of the accounts in your name and collected them in one place.
Seeing all your current accounts side-by-side will help you decide where to focus your financial efforts.
It will help you decide whether to open accounts in areas of deficiency or close accounts that are redundant.
The debt side of your balance sheet can become your prioritised goal.
3) ๐ฆ๐ฒ๐ ๐ ๐๐ถ๐ป๐ฎ๐ป๐ฐ๐ถ๐ฎ๐น ๐๐ผ๐ฎ๐น
Sometimes it may be difficult for us to prioritise our financial goals as it often seems as if everything is very important and urgent.
You may be thinking of building an emergency fund, saving for a large purchase, paying down debt, investing for retirement, and spending money in a way that makes you satisfied.
All these are very important, but where should you start? This can lead us to over analysis, the consequence, we end up doing nothing.
It is always better to do something, no matter how imperfect it is. Imperfect is better than doing nothing.
Therefore, depending on your circumstances, pick one of those goals you have in mind and start with it.
To keep motivated, tie your financial goal to your values.
Take a look at our blog post on Top 7 Financial Goals Everybody Should Have For 2021
๐๐ผ๐ย ๐ง๐ผย ๐๐ผย ๐๐
To identify your top financial goal, sit down and have a reflectionย ย of what is most important to you, that is, your values. Is it family, security, achievement? What borders you most? What about your finances makes you lose sleep at night?
How will reaching your financial goal help you to fulfil the values you cherish? This is what will keep you goingย when the tough days are here, trust me, there will be tough days.
๐๐ผ๐ย ๐๐ย ๐๐ถ๐น๐นย ๐ถ๐บ๐ฝ๐ฟ๐ผ๐๐ฒย ๐๐ผ๐๐ฟย ๐ณ๐ถ๐ป๐ฎ๐ป๐ฐ๐ฒ๐
If you think carefully and pick the right financial goal at a time, you will be more motivated to stick to your plan than when you make a random decision.
Completing one financial goal after the other , no matter how small will improve your finances by increasing your net worth or leaving you more satisfied with the way you use your money.
4) ๐๐๐๐ผ๐บ๐ฎ๐๐ฒย ๐ฌ๐ผ๐๐ฟย ๐๐ถ๐ป๐ฎ๐ป๐ฐ๐ฒ๐
One of the major reasons why it is hard for people to save is because they try to save from what is left after their spending at the end of the month or week.
The problem is that itโs in our subconscious to spend whatever money is available to us; it is hard to have a significant remainder.
You may have heard it said – โ๐ฃ๐ฎ๐ย ๐ฌ๐ผ๐๐ฟย ๐ฆ๐ฒ๐น๐ณย ๐๐ถ๐ฟ๐๐โ and if you ever wondered what it means, it means taking out the money to meet what ever financial goal you have set before you start spending the rest.
The best and easiest way of doing this is through an automated recurring transfer into a separate account – a savings account if your goal is savings, a debt account if your goal is paying down debt, an investment account, if your goal is to save up for retirement etc.
๐๐ผ๐ย ๐ช๐ถ๐น๐นย ๐ง๐ต๐ถ๐ย ๐๐บ๐ฝ๐ฟ๐ผ๐๐ฒย ๐ฌ๐ผ๐๐ฟย ๐๐ถ๐ป๐ฎ๐ป๐ฐ๐ฒ๐
Often, when you pay yourself first with a small amount of money, you will automatically and unconsciously decrease your spending in other areas. That helps you to reduce your spending and be more intentional about what you spend your money on.
Just be sure to have some money available in case you overestimated the amount of money you put aside.
You should generally experience a little discomfort after this adjustment period, and if you donโt, that goes to show you that you were definitely overspending your money.
๐ฑ) ๐๐ถ๐ป๐ฑ ๐๐ป ๐๐ฐ๐ฐ๐ผ๐๐ป๐๐ฎ๐ฏ๐ถ๐น๐ถ๐๐ ๐ฃ๐ฎ๐ฟ๐๐ป๐ฒ๐ฟ
It is often easier to stick to a goal when we know we are accountable.
Your accountability partner can be a coach, a trusted friend or family member, just somebody you know you can trust and they will help keep you on track.
Knowing that you are accountable to somebody will keep you going during the challenging times and stop you from giving up.
If you have made the decision to take control of your financial health, ditch debt, save more and generally improve your relationship with money and are unable to find a trusted accountability partner, we are here to help. Please reach out to us at info@mysavvyfinance.com.
