Having a proper record of our income and expenditures is a pretty tough job nowadays. No matter how financially literate we are, we always end up feeling sad and disappointed after every month. When the credit card bills come in, our days turn into waking nightmares.
But gradually, people are becoming more and more aware. You’ll be surprised to know that the average savings of an Australian are around $427, which is pretty decent. If you are struggling with managing your expenses, here are a few quick tips for you.
How to manage expenses
1. Track your spending
MIght sound very hard, but keeping a track of your expenses is the first step to managing them efficiently. If you don’t know where your money goes every month, you definitely have room for improvement.
Install any money-management app on your phone and track your spending. Make a record of how much you’re spending on non-essentials like dining, movies, or festivals. Once you understand where and how much you spend, you can start improving.
2. Create a budget
Creating a budget is easy but creating a real one is much more difficult. Set a practical budget that you know you’ll be able to follow. Don’t bring down the takeaway budget to $0 if you’re currently ordering takeaways thrice a week.
Make the limits simple so that you can cut down on entertainment and luxury products gradually. See your budgeting as encouraging habits like cooking healthy meals at home or reading more instead of going out to watch movies every now and then.
3. Pay bills on time
If you pay your bills every month diligently, you will save up on a lot of money. It also helps you to avoid late fees or fines and prioritize essential spending.
For example, a personal loan taken to renovate your house has to be paid as early as possible, or your electricity bills. A strong on-time payment record will improve your credit score and improve interest rates.
4. Build up savings slowly
The easiest way to build up savings is to create an emergency fund. None of us knows when we’ll be stuck in unforeseen situations, so it’s best to have some money saved up for that. An emergency fund might include money for medical treatment.
Save up a little every month and put it into this fund. At the end of six months or a year, you’ll have a huge sum left. This way, you won’t have to take loans from banks that give you high-interest rates.
5. Cancel certain recurring charges
Do you have subscriptions to magazines or streaming services that you never use? Then cancel them as soon as possible.
Even if you forget to cancel these subscriptions, your providers won’t forget and will keep charging you every month or so. Make a list of the services you rarely or never use and stop them. This will also help you save up on a lot of money.
6. Save cash
In case of certain purchases, like buying a house or a car, a bank loan is ideal. But for other big purchases, cash is definitely the best option out there.
If you buy in cash, you won’t have to pay interest or end up in a debt that might take years to repay. The money that you save up meanwhile can sit comfortably in your bank account and accumulate interest that will be used for your purchases.
7. Think of investment strategies
It doesn’t matter how much you earn; a little bit of money you invest can give you a tenfold reward. Find out if your boss or employer gives you 401(K) services, which is a kind of free money. Or consider opening a retirement or savings account for the future.
You can also think of investing in the stock market to reap benefits. Read up on these things beforehand or talk to a financial counsellor to understand which option will be the best for you.
Over to you…
Managing your expenses starts with a mindset that is willing to change. Adapting to some of the changes will be more difficult than others, but don’t give up so soon.
If you are financially secure and stable, you can lead a life of comfort without the constant worry of running into debts. Research thoroughly first and seek help if needed, and then make informed decisions.