Money is something that most people can’t afford to ignore. You have to have a lot of it to avoid worrying about it, and even rich or wealthy people spend a lot of time thinking about how to keep or increase their fortune. If money is a constant source of concern for you, or you simply think that your money could be better organised, you don’t have to let things continue as they are. By reorganising your finances, you could feel much better about your money. This guide will help you to get started with giving your finances an overhaul.
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Define What You Spend
Before you can make any changes to how you manage your money, you need to take a look at where your money goes now. A lot of people don’t really understand how they spend their money or even how much they spend each month. By going over what you spend, you can get a good picture of where your money goes and how you might be able to start making some changes. You can begin by looking at your monthly expenses, which might include bills and payments that you pay by direct debit. When payments go out of your bank account automatically, it can be easy to not really think about them. But by writing them all down so you have a list and a total, you’ll know your set expenses every month.
It can be a little harder to work out more variable expenses. You might not spend the same amount on food every month, for example. A good way to work this out is to add up a year’s worth and divide by 12 to get your average for the year. Take note of the lowest and highest amounts you spend in a month too. In addition to looking at what you spend on a monthly basis, it’s a good idea to take note of what you spend across a whole year. This is useful to help you work out what you spend on things like clothes. It also helps you to understand less frequent expenses and bigger spends, like what you typically spend at Christmas.
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Assess Your Debts
After you have looked at your regular expenses, you should take a look at any debts that you owe. You might have already started to do this when looking at your monthly expenses if you wrote down how much you’re paying towards certain debts each month. You need to have a list of what you owe and who you owe it to. This could include car payments, credit cards, your mortgage, personal loans, and other debts. You should also make a note of the interest rate on each debt. If you have a rate that will soon change, make sure you know when it will come to an end and what the new rate will be (for example, on a fixed-rate mortgage or a 0% credit card).
When you have a list of your debts, you could organise them in different ways. Put them in a spreadsheet and sort them by how much you owe, how much the monthly payments are, or the interest rate. This will then help you to decide how to tackle your debts and pay them off as quickly as possible. If you don’t have a large number of debts, you might just keep plugging away in the same way you already are. However, even if you only have one main debt, it’s worth considering different strategies for paying it off. For example, you might want to try and pay off your mortgage early by overpaying so that you can save some money.
If you’re feeling overwhelmed by debt, there’s plenty of advice out there to help you start tackling it. A charity like Step Change can help you to find the best way to pay off your debts and can help you with a debt management plan.
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Set Financial Goals
Once you have a good overview of how you spend your money, think about what your financial goals are. It might be as simple as paying off your debts so that you have more money to spare. You might want to start saving more, and perhaps even have some key goals like buying a house, going travelling, or starting to save for retirement. Your financial goals could relate to other life goals too, such as climbing the career ladder or having a family.
Try to set goals that you’re able to measure so you can see how close you’re getting. For example, if you want to save for a house, how much do you want to save? If you would like to save for retirement, how much do you want to save each month or across the year? After you’ve set your goals, you can start thinking about how you’re going to reach them.
Compare Prices for Your Home Services
Finding ways to spend less helps you to have more money to play with. Either you can start saving more or you can simply have more breathing room so you’re not worrying so much about running out of cash. One of the first ways you should get started is by looking at your monthly expenses and finding ways to reduce them. All of the services that you use at home, from utilities to entertainment, are a good place to start.
Comparing different services can help you to work out if you could get a better deal. You can compare your energy supplier, TV and internet providers, and insurance providers. It’s also a good idea to compare your mobile phone network to find out if you could be getting a better price on your calls, texts, and data. Start with the essential services to see if you can save money on them. Then look at anything slightly less essential, like your streaming subscriptions. Could you save money by choosing a different plan or choosing just one service instead of several? Make sure you get a good balance between saving money and removing little luxuries. You should still be able to have fun.
Look at Your Food Spending
Food is a necessity, so cutting down on how much you spend can seem tricky. You might think that to cut the cost of your food shop, you’ll have to start eating poor quality or boring food. But you don’t have to live on instant noodles like a student to save money on food. You can save money and still eat well, especially if you focus on buying in bulk and cooking from scratch. Shopping at the right supermarket can be key, but what you buy also makes a big difference, in addition to where you buy.
One of the things that can help you stick to a food budget is planning your meals. It may take a little bit of time, but it’s worth it if it can save you money. Plus, once you’ve been doing it for a while, you can get an idea of how much different meals cost to make. If you’re really keen, you can keep a record of how much various meals cost per batch or per portion to make it easy to add up your spend. After a while, you can work out what a realistic food budget is for you. What allows you to stick to a budget without having to deprive yourself of food you enjoy? You can try some tricks like cutting back on meat and other expensive ingredients to help you save.
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Check Your Taxes
When you’re going over your finances, you should take the opportunity to check that you’re not paying too much for anything. Simply by spotting that you’re overpaying and correcting it, you could save a lot of money. One thing to check is various taxes. Start with your council tax, which you could be paying too much for if you’re in the wrong council tax band. By changing it, you could save hundreds each year. Another way to save on council tax is by claiming a single-person discount if you live alone. You can get 25% off the usual amount. Other council tax discounts might be available too.
Be sure to check that you’re on the right tax code too. Of course, if you’re not, you can claim back any tax that you might have overpaid. Another thing to check is your eligibility for tax credits and other benefits and help with costs that you can get. If you have young children, are you taking advantage of tax-free childcare and free nursery hours? These things can save you a lot of money on childcare costs. In England, you can get up to 570 hours of free childcare per year for three and four-year-olds. You can claim child tax credit until the August after your child turns 16, and may be able to get it for longer too.
These are just some of the things that you can do to start rethinking how you manage your finances. You might find that using a finance app is a helpful way to change your thinking.
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