Many of us have a real issue with properly managing our finances. We start out with the best intentions and even in some cases put safeguards in place to make sure that we do not overspend waste money. It is no secret that bad spending habits are the root of most debts in our lives.
The most effective way to consistently tame spending habits is to take calculated and actionable steps towards managing your money. This starts with an understanding of how you are spending your money, followed by specific steps to examine your spending habits to see where you can make improvements.
So, here is a checklist of things you need to do for 2020 to help you get a lot better with managing your finances.
Try and Lower Your Spending by 20%
At first thought, this might seem like an impossibility for you. You might think that you are cutting things close and making large sacrifices already, so, making a 20% savings cut on top of an already stretched budget seems impossible.
However, one way to do this is to set clear budgeting goals so that you know exactly what that 20% a month is going to benefit. Will it be used for a down payment on a home? A relaxing vacation? Or maybe you need it for a new car, or to put towards Christmas for that year? Put that money directly in your savings account as this will let you access it if you really need to, though, you should try to avoid dipping into your savings where possible.
Be Critical About How You Spend
Be very critical of how you are spending your money every month. Nobody likes giving up their little ‘treats’ in life, but if needs must this is where you will need to start cutting things from your budget.
Think about the non-essentials items in your budget and start there. Do you have an expensive gym membership? Perhaps you can purchase a membership at a less expensive gym and get the same quality workout. Do you have the highest cable TV or internet package? Consider downsizing to a smaller and more affordable package. Do you really need to eat our for lunch every day, or could prep your workday lunches for cheaper in advance at home?
Have an Emergency Fund
An emergency fund is a great thing to have, especially if you are a little bit less skilled at handling your money. An emergency fund does exactly what it says on the tin: it is a fund put aside specifically for dealing with emergencies. There are many reasons why you might need an emergency fund, such as a broken-down car, a medical emergency or broken home/electrical appliances.
Your emergency fund should be at least three months of living expenses, and this means only the essentials: food, rent, utilities etc.
Sticking to a strict budget can be really difficult for some people. However, if you are able to budget well and stick to it you will see great improvements in your spending in no time.