Time to re-think the way you manage your money
Let’s start with 2 questions to ponder;
1) If you were asked “How much do you earn in a given week/month/year”? How would you answer? You likely wouldn’t declare the figure, yet internally you would have some appreciation and understanding of what you earn in a given period. Or better yet, you know the exact amount you earn come payday.
2) If you were asked “How much do you spend in a given week/month/year”? How would you answer? You likely wouldn’t be able to devise a clear-cut figure, or like the majority of people who wouldn’t have a clue where exactly your money disappears to on a week-in, week-out basis.
This is the difference between our income and expenses. It would be safe to assume most people have a firm awareness of their income with varied regard to their expenditure. Why is this the case? Likewise, in answering the second question we likely would admit that we do spend too much and you may often find yourself wondering “Where does all my money go?”
Another question to consider; do you ever think an increase in income earned would result in a change in attitude toward our finances, AND a different response to our original questions? It would be a fair bet to assume our mind-set here would not differ; we may still have a good grasp on our income figure, yet the expenditure amount would still remain variable and undetermined. Do you think your spending habits and more importantly your savings habits would change if you were to receive a boost in income?
For the next week, or better yet month, keep a record and track all your expenses. Include all bank statements, receipts, payments made via cash or card to total up all expenditure. Include your fixed, regular costs e.g. rent/mortgage, power, essentially your costs needed for everyday living, as well as you irregular, variable costs e.g entertainment, shopping costs are a couple that come to mind. If possible compare findings with previous months to determine your financial standing and where improvements can be made in your day-to-day financial decision-making processes.
Time to budget like a pro
Track your expenditure and given today’s smartphone-driven world this is made even easier with many apps available at your fingertips to guide you with the task. Simply put, a budget is about deriving where you wish to allocate your income for a given period – accounting for fixed/regular and irregular costs. Remember to aim to live within your means and your budgeting processes will be made that much simpler and manageable. Modify your budget so you can maximise your savings capacity and determine how much is enough?
If you do find yourself struggling…
Let’s say you’ve tracked your spending for the past couple of months and you determine that your expenses constantly exceed your income. You have a deficit that is constantly growing and your repayments have the potential to spiral out of control. We don’t want this. Aim to reduce spending and expenses as best you can. Alternatively have you considered a debt consolidation loan? A debt consolidation loan helps simplify your finances by combining all your debt into one simple loan. This is a simple way to de-clutter and organise your finances, allowing you to sort and take control of your finances with one loan, one interest rate and one regular payment. Simple. For more benefits of a debt consolidation loan check out; https://nzcusouth.co.nz/7-benefits-of-a-debt-consolidation-loan/
If you are already repaying debts and formulating a strategy to do so check out https://nzcusouth.co.nz/debt-snowball-or-avalanche-whats-the-best-way-to-tackle-your-debt/
Alternatively, if you have tracked your spending habits over the past months and achieved a surplus/positive number, good news. From here, maybe look to increase your debt repayments or increase your contribution to your savings account.
The basic premise to get ahead in a financial sense is to spend less than you earn, right? Simple enough, but it is a principle that is often neglected in today’s want-now, pay-later society. Aim to tackle debt, reduce spending and increase savings. Be in control of your financial destiny. Be better informed, to make the necessary personal finance decisions you need to get ahead. Learn from past mistakes and heed the advice of others. The earlier you start making change and taking control of your finances, the better. Check out; https://nzcusouth.co.nz/what-money-lessons-do-you-wish-you-had-started-earlier-in-life/
And for more tips check out https://nzcusouth.co.nz/top-tips-for-managing-your-time-and-your-money/