Achieving financial health means being able to relax when it comes to your money.
It’s feeling in control of your spending, being able to plan for the future, and having a safety net in case of emergencies. From being more mindful with your spending, to setting a budget, we’ve outlined seven habits to help you on your quest for financial happiness.
1. Track your spending
Sounds simple, but one of the easiest ways to help you on your journey to becoming financially stable is to keep a watchful eye on what you’re spending. While you could view your statements every month, others find it useful to write down their expenditures or use a money management app such as Plum, which gives you a real-time view of your daily spend and suggests how much to set aside in your savings based on your spending pattern. Another app we recommend is Emma, which connects to all your bank accounts and pension, and even lists which subscriptions you have. You’ll have a clear picture of your spending habits (hello takeaways and coffees) with which to set your money goals.
2. Make a budget
No, really: make a budget. It’s another simple task that can have a genuinely big impact. If you track your spending as above, you should develop an accurate picture of your average spending. With that, you can now create a monthly budget for your disposable income as well as a plan for saving. Start by putting down your total monthly income, which includes your salary, pension, benefits, extra income, and any investments.
In another column, write down your fixed costs including your rent or mortgage, bills, childcare, and groceries. Include any other necessities such as hobbies and debt repayments. Allow for larger amounts that might only come out once a year, such as water bills, and divide these by 12.
Give yourself a budget for any emergencies and add in anything you’re saving for – like holidays. Subtract your outgoings from your income, and you’ll be able to see what you have left to live on per month.
Having this picture means you can quickly see where to increase your savings or reduce your debt. Perhaps you might need to curtail how many rounds you buy at the pub or look for offers at the supermarket. Being more mindful of where your money goes will help you resist impulse shopping and reach your money goals quicker.
3. Find a better deal with your providers
We can all be guilty of choosing the easy route. Renewing the same providers each year might be easy – but it’s not always the best option when it comes to your finances. Comparison sites such as Compare the Market and Confused.com are brilliant at surfacing the best deals for things like your broadband and mobile phone subscriptions. Most providers won’t want to lose you, so ask them to better what you’ve found rather than simply matching it. Before speaking with your existing provider, check the terms and conditions of your contract, as exiting early may incur charges.
4. Save for emergencies
It’s always worth putting money into an emergency fund as you never know when you might need it. MoneyHelper and MoneySavingExpert recommend having an emergency fund of between three to six months’ worth of savings. This financial “safety net” is there in case your financial status changes. With a budget in place, you can work out how much you can afford to save knowing that every penny is helping you in the long run. A good tip is to create a separate account for your emergency fund, so you’re not tempted to spend it and set up an automatic direct debit to save yourself time each month. Watching your money grow here can be a great motivator to save more.
5. Pay off your debts
When you let your credit card debt build up it can feel as though your salary disappears before you’ve even had a chance to save or spend. Set automatic payments each week. These regular repayments will also help you achieve a better credit rating, saving you money when on things like taking out a mortgage. Make sure you always pay on time, and prioritise debts that have a higher interest rate. If you’re lucky to have a windfall one month, be disciplined enough to pay off your debt first.
6. Find additional sources of income
The internet is a great way to generate more than one source of income. There are many ways you can find yourself stuck in an economic rut, but it’s never too late for a change! Try turning what was once just a hobby into a mini-business opportunity or selling your second-hand wares on places like eBay.
7. Have more open conversations with friends and family
Remember, the key to financial health is that you don’t have to deal with this alone. Break down the taboo of talking about money by being open about your financial situation with friends and family. You may be surprised to find friends to share advice with. Whether it’s the name of a cheaper energy supplier or a great deal at a supermarket, exchanging tips and best practices is a fantastic way to save more money.
By instilling new mindful money habits around budgeting and tracking your spending, as well paying off your debts, saving for the future, and being more candid about money, you’re likely to feel happier and freer than ever before.