Your guide to breaking bad financial habits
Don't let your expenses get on top of you
Do you ever find yourself short of cash at the end of the month? How about feeling flush on pay day then finding you have only enough to pay the bills and just get by until you get paid again?
In allowing yourself to develop bad financial habits you’re more likely to get in and stay in debt, however, by learning from your mistakes you can start to better manage your outgoings, start saving and even have a little left over to treat yourself and your loved ones.
Make a budget
Having a clear idea of what money you have coming in and out is one of the first steps to understanding how bad things really are. By having a budget, you will clearly be able to see how much money you have left over after paying all your bills.
To create a simple budget, either use a spreadsheet or just grab a pen, paper and calculator. You’ll also need a few recent bank statements. Start by jotting down your salary and any other income. Then make a note over everything you spend – rent or mortgage, gas, electricity, water, council tax, TV licence, phone bill, groceries, gym membership. Basically, any regular outgoings.
By subtracting one from the other, you can see how much you have left over and can also see if there is anything you could cut out.
Without knowing your budget, you could easily overspend and not allow yourself enough to cover you through until pay day. Keep your budget on track, monitoring it monthly, and you’ll find that you won’t overspend as much.
Stop spending money
OK, sometimes you really do need to spend money but there are some items that you could just stop buying, or you could even switch services to get a better deal.
Do you have an expensive gym membership that you rarely use? Are you subscribed to Netflix but never watch it? What are you paying for every month (check back on your budget) that you could cut out? You’ll find that there are some things that you pay for that you can cut straight out and save money instantly.
Then there are the one off purchases – a new pair of shoes, a sandwich and coffee for lunch at work, or a new DVD. Do you need to buy these things? Obviously if your shoes have holes in they need replacing but can you buy online for cheaper?
With a sandwich, the shop ones may taste delicious but how much money would you save making your lunch at home? Quite a lot I expect.
Pay your bills on time
If you fall behind with your bills or don’t have enough money in the bank to cover payments then it can really have a bad impact on your finances going forward. Not only will it mean that you’ll face late charges but it will also hit on your credit file showing a default and making it harder to get credit in the future.
Firstly, by using a budget tracker and knowing what money is coming in – and when – it will help to ensure that you have enough money to pay the bills. If you know in advance that you won’t have enough money then talk to the creditor or company you owe the money to. You could either ask to make the payment a little later or ask to have the payment date changed permanently, which should help with catching up.
If you don’t ask, and don’t tell them, then they will just charge you but if you communicate with them they will be more likely to help you out.
Even if you live pay cheque to pay cheque or month to month you need to think further afield if you really want to break any bad financial habits.
By only having enough money to get by, if something happens then how will you manage? Like what happened if your car breaks down, or if the washing machine needs replacing, or there’s an unexpected letter from the school about another expensive trip?
If you make some plans for an emergency in the future then, when one happens, it won’t mess things up. Saving a little money each month will ensure that you have a full back, a rainy day fund, should something go wrong.
By changing just a few things you do each month, and being conscious of your spending and saving, you can help to break any bad financial habits and get you on track and in control of your money.