Have you ever noticed how managing money has a feel of dieting to it?
Not only is there the challenge of knowing what method will work for you, but more significantly, what method will bring a long-term, sustainable, satisfying lifestyle change for you.
If you’re battling with money management you’re living paycheck to paycheck despite making more than enough money, one culprit might be as simple as overspending. Remember that just because the money is there doesn’t mean you can make the buy. You also have to take into account the bills and expenses you’ll have to pay before your next payday. Here are some tips to improve your financial habits.
There are three money mistakes that almost everyone makes at some time or another. Not addressing these can cause financial stress. For employees, that stress can lead to time missed from work, distractions, or work time being spent dealing with financial issues. Financially stressed employees are also less likely to contribute to a company’s sponsored retirement savings benefits, simply because they are living paycheck to paycheck.
Here are the mistakes that financially stressed people are making — and how you might recognize them.
- Overspending. Some may not have a budget at all, others may have a budget but do not stick to it. As a result, credit card debt increases. This can cause stress on finances both in the short and long terms. Long term, the fine print and interest rate make it difficult to pay off. In the short term, when emergencies come up — like a frozen hot water tank — there is no available credit to fix it. When employees are asking for advances, that could be a sign of a deeper problem.
- Emotional spending. For some, shopping and spending makes them happy — temporarily. This is common when an employee is going through a breakup or other major life change. They may buy new wardrobes, cars, or other items to get a quick mood boost, which crashes down when the bills come due.
- Binge spending. The reason most diets fail is because they often deny dieters of the foods they like. The same can be said of budgets and spending. An employee may bag their lunch for weeks, only to spend their savings on a binge shopping trip over a weekend.
There are temptations at every corner. If you have a feeling that you’re overspending each month, there is probably a very good chance that you are. When you have some money, you feel as though you want to spend it on literally every item which you see. Some signs that you’re overspending are neglecting your bills and opting to spend money on fun expenses, or carrying a balance on your credit card, getting a loan from the bank and struggling to make minimum payments.
You can check, How to Get Out of Debt Faster, for some tips and insights to get out of debt faster.
Before you can adjust any spending habits, you need to have a solid understanding of what money you have coming in each month, and where that money goes, also known as Budgeting.
Budgeting: a one-word solution to getting the things you really want. Just mentioning the word “budget” is enough to make people cringe. About 40% of people don’t have a budget at all, and about a third of people who don’t have budgets say they put it off because it’s boring. Others say that they simply don’t have the time to budget.
Now, these are pretty sad excuses for dodging the budgeting bullet, considering that budgeting is literally the only way that you will ever be able to afford what you want! If you can think about spending your money in a way that makes you happy, you already have an incentive to start budgeting. Outside of winning the lottery, you won’t find a more effective way to pay off your debt and reach that goal.
Budgeting makes your life better because
- It allows you to be ready for emergencies. Expensive medical, dental family, pet, car, and home emergencies are unavoidable facts of life. The problem with not having a budget is that you’re not able to track your cash flow or put any extra money aside for emergencies. Budgeting acts as a form of protection for unexpected bills and allows you to prepare for them financially. The stress of the emergency itself is unavoidable — but it really helps to not have to worry about where you’ll find the money to pay for the bill.
- It keeps you out of debt. In a world where credit is king, some debt is unavoidable and even necessary. Having a budget will give you an idea of how much debt you can only afford to have and enables you to pay off loans. Budgeting helps control debt to keep your credit score as high as possible and prevent a vicious spiral into deep debt.
- It helps you achieve your financial and life goals. Whether you dream to retire early and spend the rest of your years hopping from one country to another, set up your own business and be your own boss, or save up to buy a house or car, a budget is your financial roadmap to achieving these goals. Without a clear-cut budget, there is very little saved for emergencies, investments, or major purchases.
A budget will be there to guide your spending and track where your money goes each month. Not only that, but a budget can be a great way to stay accountable to financial goals you’ve set. You can budget in a few different ways: whether it be through a more traditional tracking method like a spreadsheet, or you can opt for a modern budgeting tool like a free or paid app. Another tip is to not simply copy the budget for last month onto the next one. Perform this financial preparation afresh each time. This will keep you aware of the flow of money in your life. Direct the bulk of your cash to important expenses such as utility bills, education, food, home maintenance as well as your savings.
Making a foolproof savings system is very essential, especially in the process of budgeting. This is where a percentage of your income is directed to your savings account automatically. By setting up such a system, you reduce the risk of making a mess of your money and ending up with no savings at all.
The tips above can help you to master the process of creating a budget. By mastering this activity, you can establish a good financial foundation for your future.
Spending doesn’t need to be complicated. You should understand that there’s no one-size-fits-all approach. Wherever you are in your budgeting or saving journey, the important thing is to not give up on yourself! Budgeting is so vital to your financial health that it really doesn’t matter if you’re just starting out or if you’ve tried and “failed” to budget in the past. No matter who you are or where you’ve been, there’s no better time to save than right now. Making the effort is always worth your time.