When it comes to managing our money, one of the most common pieces of advice we’re given is to simply ‘set a budget and stick to it’. That’s all well and good theoretically, but if the solution to our money woes was actually that easy to implement in reality, how are so many of us still facing struggles with over-spending, ‘mid-month’ money mysteries and vicious debt cycles each month? Something quite clearly isn’t adding up (if you’ll pardon the pun)!
Since everybody’s individual financial situation is unique to them, there is no magical ‘one size fits all’ wand we can wave to fix all our problems with a single flick of our wrists – though it certainly would be nice if we could! That doesn’t mean all hope is lost though; lots of us are falling into the same budgeting trap of oversimplifying (or, conversely, overcomplicating) things for ourselves without having a realistic and achievable goal to work towards, so we’ve put together a few tips which we’ve found useful and they will be useful to you too.
- Get familiar with moving money: watching your salary come in and then go straight back out again can seem quite disheartening to some, but often it’s one of the best ways to ensure you truly prioritise the things that matter most and don’t get in your own way when it comes to achieving your financial goals. By moving your committed monthly payments as close to payday as you can and transferring any planned savings into the appropriate account earlier on in the month, you will make it that much easier to avoid the awful pre-payday shortfall we all dread and keep your eyes firmly on the prize.
- Quit guessing and get to grips with your numbers: one common mistake people make when they try to budget is guessing (and therefore underestimating) their monthly outgoings, which causes them to then overestimate how much money they have leftover to spend each month and consequently overspend instead of save like they planned. If this sounds familiar to you, it might be worth taking the time to go through your last few bank statements and noting down all your regular expenses (car insurance, council tax, utility bills, etc) as well as your average food and drink shop spends; this might seem scary and overwhelming at first, but it will give you an overview of what your monthly expenditure actually looks like and might just help you spot areas where you can reduce your costs quickly and easily.
- Allocate your disposable income: once you’ve got a grip on what money is coming in and going back out again on a monthly basis, you should (hopefully) have some money left over to act as your disposable income each month. This remaining pot of so-called ‘disposable’ money may sound like a nice cushion to have in your account, but the reality for most of us is that leaving this money ‘homeless’ means it gets frittered away and potentially wasted without us being consciously aware of it. So, instead of letting your hard earned cash slip through your fingers, try giving every pound purpose by deciding where you want to spend that leftover amount in advance, whether that be on a coffee date with a friend, a new book you’ve been wanting to by, or maybe topping up your holiday savings pot. You’ll be surprised by how far that extra cash can go!
- Tackle Your Debts Sensibly: although low-interest debt consolidation loans are widely considered to be a great option to help manage debts, they aren’t for everybody, so it’s really important to consider all your options before committing yourself to a plan long-term. There are numerous paths you can take to becoming debt free so we won’t pretend to know which is best for you, but two popular methods you might want to consider are the ‘snowball’ or the ‘avalanche’. The ‘Snowball’ method suggests making the minimum monthly repayments on all your debts and then using anything leftover to make an additional payment towards your smallest debt to help clear that off faster (before repeating the same process with your next smallest debt, until eventually they’re all clear). The ‘Avalanche’ method, on the other hand, recommends focusing your leftover money on the debt with the highest interest rate first regardless of its size, thus minimizing the amount of interest you pay overall. The suitability of any debt management technique depends entirely on your individual situation, of course, so make sure whatever you choose is realistic and achievable for you and your budget.
If money worries are weighing you or your employees down and you’d like some friendly, personalised advice on how to ease the emotional burden, contact our team today and we’ll be happy to put you in touch with one our partners here at Employees Health who can assist with financial health and advice. Please note that all financial advice is done through our partner companies and not directly through Employees Health.