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Good financial habits can, quite literally, change lives. Being responsible with money and living within your means takes practice, but learning how to manage your spending habits now could make for a stress-free financial future.
Spending more than you earn, not having savings and getting into unmanageable debt are all bad financial habits that make achieving your goals harder.
When something breaks – like the car or the washing machine – or your situation changes at work or at home, you could find yourself wishing you’d reined in the spending sooner, or set aside some money every month to cover emergency expenses.
The good news is, it’s never too late to establish good financial habits. The sooner you decide to take control of the finances, the sooner you can work towards your goals without worrying about money matters.
We’ve put together 10 ways to learn how to become good with money, manage your spending habits and become financially stable.
1. Set a budget
First things first: get budgeting. A budget can help you see and control the flow of money in and out of your accounts, plan ahead and feel like you’re on top of things.
Figure out how much you can spend on what you need and stick to it. If there’s room in the budget, anything extra needs to be factored in as a luxury – don’t forget to include miscellaneous costs like birthday presents, coffees with friends and the extra mid-week shop.
2. Pay off debt
As well as making a sizeable dent in the budget thanks to possible interest rates, debt can hang over you, so it’s best to pay it off as soon as possible. Paying off debt is a weight off your mind and frees up more of the finances for you to use productively.
3. Spend less
Sounds obvious, but it can be easier said than done! The first step is to look at your outgoings and see what you can cut back on, so what you spend does not exceed what you bring in.
When working out how to manage your spending habits, consider what’s really essential and what isn’t. If something’s just a nice-to-have, the money might be better invested in a savings account.
4. Create an emergency fund
An emergency fund comes in handy in various scenarios, like when something vital breaks, or if you have to make a sudden last-minute trip somewhere.
Knowing there’s cash available in the event of an emergency can be a relief when life gets stressful, so give yourself some peace of mind by setting up an emergency fund.
5. Work on your credit score
If you’ve struggled with poor credit in the past, now is the time to work on rebuilding your credit score.
A good credit score can be the difference between being accepted for a mortgage or not, so it’s worthwhile finding out your score and, if necessary, rebuilding your credit profile. Credit score building strategies may range from using a credit-building card, to correcting errors on your credit file.
Check out the government’s Money Helper website for more tips on improving your credit score.
6. Pay more than the minimum
If you’re paying off credit cards, loans or a mortgage and you have a little extra cash from time to time, paying more than the minimum can help to clear your debt faster.
Most loan and mortgage providers accept extra one-off payments, and it means less interest in the long term.
7. Plan for the future
The best way to be financially stable is to plan for your future. There’s no predicting what lies ahead, so being prepared for any eventuality can help reduce stress in situations you might not have foreseen.
As well as paying into a savings account, think about setting up a pension if you haven’t already, and look into life insurance, too, for extra peace of mind.
8. Set some goals
If you want to start saving or paying off your bills, setting goals can provide the impetus for driving real change.
Perhaps you’d like to be debt-free by a special birthday, or maybe you want to save up for a once-in-a-lifetime holiday. Either way, give yourself a goal and it might inspire you to establish better financial habits.
9. Check your subscriptions
Are you paying for things that you’d don’t really use that much? Like multiple TV or music streaming services, big mobile phone contracts, or old subscriptions to magazines or other online services?
Review your subscriptions and decide whether a) you actually need it and b) if it’s value for money. If not, maybe it’s time to pull the plug.
10. Compare utility prices
Gas and electricity costs are usually some of the biggest monthly bills, so see if you can make savings here.
Use a comparison site to look for cheaper tariffs and sign up for a cashback site to get a bit of money back when you switch.
Follow our top tips and you’ll soon learn how to become good with money. Don’t forget, when you make a purchase through DivideBuy, you can split the cost of your order into manageable, interest free instalments – making money management that little bit easier. You can take a look at our FAQs here.
