According to the Money Advice Service, more than 8 million adults in the UK have problems with debt. That’s a significant proportion at around 16% of the population. So, if you’ve struggling to manage your money in the past then you’re certainly not alone. However, the reality is that getting it right when it comes to cash is not rocket science – if you really want to turn things around then you can.
The basic equations
Successfully managing your money starts with grasping two basic ideas. First, if you want to have more in your budget then you need to earn more. Second, if you want to have more in your budget then you need to spend less. Creating disposable income to start reaching savings goals requires getting to grips with these fundamental finance truths. Whether you earn more or spend less, that’s the only way you can create the flexibility that leads to better money management.
Getting good at budgeting
Many people get to pensionable age without having grasped the basics of budgeting. But it’s the simplest – and most important – skill for anyone keen to be better financially organised. Budgeting gives you crucial knowledge of what’s happening with the cash that you have. Once you can budget you’ll know where the money you’ve spent each month has gone – so you can adjust your spending the next month to save. You’ll also be able to see what your biggest expenses are and what you currently have left – so that you don’t get into a situation where you have nothing to spend a week from payday. This will help you prioritise expenditure too – there are some regular outgoings that are essential to pay on time such as your mortgage/rent, utilities, personal loans and credit card repayments; there is no option but to pay these. However, other costs like food, clothes and entertainment are the places where you can cut back. Managing your money isn’t rocket science – it’s all about budgeting.
Helping yourself out
For those who really struggle with money management it’s important to get some help with it. If you’ve got a relative who is good with their money then ask for some advice on how to start getting it right yourself. There are plenty of money management apps out there, which can help with everything from setting savings goals to making sure you stick to monthly budgets. If you want some help face to face then most financial advisors offer a free introductory session and you can always find support via Citizens Advice or the Money Advice Service.
Start setting goals
Money management often seems like a chore – that is, until you start using it to work towards goals that could change your life. Self-motivation plays a big role in the art of successful financial management and you don’t have to wait to start setting goals until you get to a certain income or savings level. Goal setting could be anything, from aiming to pay your debts off by the end of the year, to starting to save for the deposit for a home. Once you’re fully focused on the life you want – and the financial steps you need to take to reach it – then you’ll find that everything else tends to fall into place.
You were very fortunate to have a good role model in your mother who taught you good money management skills - I had to learn the hard way!
Schools teach our kids many skills but I think they really should teach basic money management skills because so many kids do not learn them from their parents - especially in these days of easy credit. Here in the UK people are being sucked in to a cycle of debt by 0% credit card deals and cheap loans (particularly car loans)
I learned money management from my mother at an early age and started managing my own money when I started picking beans at nine in the fields. Earning less than three dollars a day, I saved my money in a savings account rather than spend it on candy and toys like the other children. I paid my own way through college with scholarships and summer earnings, sometimes working 12 hour days in a factory. I still had fun on the cheap, doing things for free or just for the gasoline it took to get there. I avoided expensive habits that other students engaged in.
Ron