Money management is one of the most important life skills you can develop. No matter how much or how little you earn, you need to make sure that you manage your money wisely to ensure that it lasts between paychecks, that you are always financially secure and stable, that you avoid debt and that you have some savings behind you for the future. Of course, you’d imagine these major life skills would be taught at school, but for most of us, this is a learning curve we have to discover ourselves. For some of us, we learn the hard way and experience major debt before getting ourselves back on our feet. However, it’s much easier to avoid this and practice positive money management sooner rather than later. Here’s some advice that should help with your own journey.
Everyone needs to live to a budget. A budget is a tool that you can use to determine how much money you bring home, how much you have to pay out for essentials and financial commitments and how much you’re left with. This will give you solid figures concerning how much you have available to spend, can allow you to distribute this amount through the month and can also help with saving, as you know how much you can realistically put aside for a rainy day. Budgeting basic steps include:
- Figure out how much you take home after tax and other deductions each month
- Note down all of your essential outgoings (rent or mortgage payments, energy bills, water bills, food, contracted payments)
- The figure you’re left with is your disposable income. This is how much you can spend each month without slipping into debt.
As long as you don’t exceed your disposable income when it comes to monthly spending, you’ll stay clear of debt and can lead a comfortable lifestyle.
Of course, there are wise ways to use your disposable income. While it’s important to enjoy yourself and make sure you’re using some of your disposable income on experiences and other purchases you enjoy, you do need to be savvy to maximise your financial wellbeing. This is where a financial advisor like Kanner Group can come in useful. They’ll be able to survey your financial health and determine what you need to do to maximise your savings, invest and make other decisions that will provide you with long term financial security, rather than short-term security only.
If you already have debt, it’s important that you take steps to clear it as soon as possible. The sooner you clear your debts, the sooner you remove yourself from the burden of interest and the less you pay in the long run. Contribute as much of your disposable income as possible to clearing these debts while maintaining a good quality of life. You could even take on overtime or freelance work to help speed this process up.
Hopefully, some of the steps above will get you started on a journey towards financial wellbeing. Each step will count!