For most people, the past two years have been complete chaos, with local lockdowns, travel restrictions, job losses, and the risk of becoming extremely sick a reality. The pandemic has forced full-scale financial reviews for many businesses and institutions worldwide.
It has created mass panic as each enterprise attempts to survive, saving money through any means possible; jobs cuts, downsizing, undercutting others and selling assets to stay afloat.
The knee-jerk reaction of businesses tightening their financial grip was inevitably passed on to thousands of employees and on to you and your family. Understanding how to take control of your finances is a must in this time of uncertainty.
For you to take charge of your finances, you must set goals, have a budget, and be prepared to shop around for the best deals. Financial literacy is also important when it comes to managing your finances. Some changes are easier to implement than others, but if you stick with them, you will develop excellent financial management skills that will serve you for the rest of your life.
Become Informed
Educating yourself on finance is time well spent. The knowledge you gain will stay with you for life and should act as a library of information you refer to before making any financial decisions.
The more you learn, the greater your library becomes, helping you make the best-informed financial choices relevant to your situation. You can access financial information covering every topic you can think of via the internet or, if you prefer a book in your hand, you can find good content at your local library.
Another option to build your general knowledge of finance is speaking with others you trust and absorbing what they have to say on a particular subject. You shouldn’t feel pressured or awkward when talking to those you trust about finance; if you do, maybe re-think your approach, or change the topic of the conversation if you suddenly feel out of place mid-conversation.
You may be ready to begin your financial education journey but need a starting point. You could start by understanding how you are paid and how the payment system works, or by trying to understand the different types of savings accounts, both the benefits and downsides to each one.
If you feel there’s so much information to take in, try to remember the key points, start writing notes down, or start a financial knowledge book personal to you. Giving yourself the knowledge to make informed financial decisions will save you money too.
Many businesses, enterprises, and individuals specialize in financial advice, offering their assistance in return for payment. Knowing a particular subject before you open a dialog will help you spot a poor deal or choose a good one. If you can find time to begin your financial education journey, you will 100% benefit from what you learn. It will also allow you to pass on your learning to others, such as family members or close friends.
Set Goals
Become the master of your incoming finance vs. your outgoings. Setting financial targets is a great way to take charge of your money; it will make you automatically check your accounts more often as you track progress towards your chosen goal. It will also make you more aware of every transaction you make that takes you away from your target.
A great plus to set a financial target is anyone can do it regardless of the amount or type of target. Remember your financial targets are personal to you. You may have your heart set on upgrading to the latest games console, or you want to increase the amount of money you have saved by 10%, both can be achieved by setting financial goals.
The timeline to reach your financial goal can be whatever you wish it to be, one month or five years; it is linked to the plan you create to get there. For example, you are super excited to purchase the latest games console, and you plan to be able to do so within the next two weeks.
An essential factor to be aware of when setting a financial target is to be realistic with what’s achievable. If selecting a two-week target means other financial areas will suffer such as, affording to pay a utility bill, then two weeks isn’t realistic.
You need to be completely honest when setting financial targets and start working towards achievable ones. Like many activities in life, setting goals and achieving goals is a skill that needs to be practiced. Before trying to conquer Wall Street, start with smaller targets, and build confidence within yourself and your ability to set and achieve goals.
Setting A Sensible Budget
Are you trying to stop your hard-earned money from bleeding away? Do you understand the world of budgeting but never seem to get it right with your finances? Or are you wondering, “my finances are out of control?” Start to look at your incomings and outgoings as percentages.
*Disclaimer – there are many ways to look after and budget your finances with no one type fit for all.
Viewing your monthly incomings and outgoings as percentages will help you understand where your cash is spent differently and is crucial to budget sensibly. Try the below exercise.
Step 1
Make your maximum monthly incomings equal to 100%
Monthly Pay = 100%
Step 2
Record how your money is spent over one month, spending precisely as you usually would, with no changes. Allocate each expense in a category such as Utility Bills, Food, Mortgage, Leisure, Loan Payments, Transport, Fuel, etc.
It may seem slightly overkill, but if you’re serious about understanding how your money bleeds away, you will do it.
Step 3
Understand your spending.
Your records may reveal, that you spend a total of $300 per month on a mortgage. You also find, that another $150 is spent on utility bills (Gas, Electric, Water, etc.), a further $200 is spent on Food, $100 on Leisure, $100 is saved, and $100 on transport.
Step 4
Calculate the percentage totals of each category, in relation to the total amount you are paid each month.
Use this free online percentage calculator
Viewing your monthly costs as percentages, will show how your money is spent and can be used as an aid when trying to budget conservatively, knowing you won’t be left short anywhere else. This exercise comes as a shock for most people, with the realization of how much money gets spent in areas you cannot avoid. It is 100% worth doing 3 to 4 times per year.
Emergency Fund
Creating an emergency fund should be high on your priority list. It’s exactly what it says on the tin, money for a rainy day or, more importantly, money when all other options have failed. If all goes pear-shaped, it will give you peace of mind that you have a backup fund.
You can start building an emergency fund right now, saving a small amount each week or month. You don’t need to save great amounts each time; as little as $50 soon adds up over a year. It is well documented a good-sized emergency fund is approximately $1000 or at least 10 to 15% of your whole year’s earnings.
If you’re struggling to calculate what yours is, try completing the above exercise and multiply your total monthly spend by 12 to give you a rough idea of how much you spend each year, then work out the value of 10 to 15%. Having money set aside is a great way to take charge of your finances.
Bounty Hunter
It’s true, we all want the best deal!
Finding the best deal on everything you buy is no easy task when considering how many items you purchase and the considerable variety of shops selling the same products. The internet has undoubtedly changed the way consumers shop worldwide, allowing you to search far and wide sitting in the comfort of your home or workspace, with many deals at your fingertips.
To search for active discount codes while browsing, you can employ cost-saving sidekicks such as Honey or Olo. Groupon is another voucher mecca, providing you with many deals, or Quidco is renowned for giving you cashback on spending.
The more often you find a bargain, the more likely you’ll realize when you’re not getting one. Time spent learning the base costs of essential items you regularly purchase will stand you in good stead and help you save money. It’s better off in your pocket than theirs.
Accept The Truth & Ask For Help
It’s time to be honest with yourself. If you struggle financially, have bad money habits, are addicted to gambling, or worse, there’s no shame in asking for help. It’s the first step to turning a corner. Confiding in others, be it experts or a trusted family member, may seem extremely difficult at first, but once the initial conversations have been established, you’ll feel better.
Admitting you’ve made some mistakes with money regardless of the situation goes against the human base code. Admitting any slight mistake takes integrity and honesty, let alone issues with money, but you are not alone.
According to the UK’s financial capability charity, The Money Charity, its estimated global credit card debt came to over £57.9 billion in 2021. Poor finance can lead to all sorts of trouble, with repossession of assets and possible prison time being two of the actions that can be taken against you. If you do need to seek advice and are unsure of who to turn to, use the below checklist to help safeguard your choice.
1) Make sure the financial advisor is accredited by the correct governing bodies.
2) Check their credentials – Be sure they have a clear record of work, the company is registered, and has been established for a suitable amount of time.
The majority of legitimate financial advice organizations will not hesitate to provide you with the above information, and often the services are free of charge.
Start Them Early
Building up financial knowledge should not be limited to adults. Many young children and teenagers end up inheriting vast amounts of wealth at a young age. Lacking life experience can make this very difficult for them to absorb.
Starting to educate younger people on the financial workings of the world can be made much easier with suitable materials. Children’s books or comics are a great way to make learning about finance fun and interactive.
Comic book giant Marvel has released a comic based on the Guardians of the Galaxy franchise, with a fast-paced plot where the characters learn about the importance of saving. Passing on your knowledge can make a difference in the lives of others.
Review Your Recurring Charges
Do you pay for services that you rarely use? Even if you don’t use streaming services or mobile apps on a regular basis, it’s easy to overlook those monthly subscriptions debited from your bank account.
Examine your budget for such costs, and consider canceling any subscriptions that aren’t necessary in order to save more money every month.
Automate Your Monthly Expenses
Automatic bill pay for recurring monthly expenses is a crucial aspect of financial management. You can prevent late payment charges by setting up auto-pay for recurring monthly payments. Autopay works best for monthly bills with consistent amounts that don’t change greatly from month to month.
Put Money Aside for Retirement
You will retire at some point, and doing so without retirement savings will be difficult. Pensions are no longer offered by many firms, and Social Security only replaces about 40% of your salary.
Because contributions are automatically withdrawn from wages, workplace retirement plans like 401(k) accounts can be a useful place to save for retirement. Furthermore, many firms will match a percentage of their employees’ contributions, boosting retirement savings even further.
Closing Thoughts
Taking charge of your finances is a must if you want to achieve all you can from the money you earn. Start by expanding your knowledge on particular subjects and referring to what you have learned before making any monetary decisions.
Setting goals, being sensible when you budget, and understanding the areas where your money is spent, will help you look after your hard-earned cash with a renewed passion, giving you confidence when you shop.
Allocating money for a rainy day in an emergency fund can reduce the stress of an unexpected financial burden, be it a broken car or window in your home. The amount of money you can save by hunting for bargains will surprise you; use all the tools available to you; coupons, vouchers, discount codes, etc., are all available at your fingertips. The money is better off in your pocket than there’s!
Finally, if you are stuck or know someone who needs help, do the right thing and reach out, be an ear for someone to talk to; it can make all the difference.
When you get a chance, try to pass on your knowledge to others, teenagers and children, using appropriate resources.
