How to get your personal finances in order. Personal finance management is anymore for analysts. Nowadays, anyone with access to the internet can easily calculate their spendings, pension schemes, and estimate earnings from savings accounts.
Over the past few months, our lives have changed quite drastically. We like it or not, actual circumstances have forced us to reconsider our priorities. Even though the lockdown has started easing in some parts of the world, many people still struggle financially.
In this article, I put together a few resources to help you maximize your finances during this uncertain period.
After dealing with mental health, personal finance is the second problem that people have to deal with during lockdown. A study made by bankrate.com revealed that only 4 in 10 Americans have savings that they rely on in case of an emergency.
It would be really helpful if we were taught in school how to manage our money; sadly, we either have to learn by ourselves from various sources, or we can get help from financial advisors such as letsmakeaplan.org
First of all, let’s see what personal finance is and what it implies
Personal finance is the management of the money that you make and spend. Managing your personal finances creates financial stability, which means you have a house to live in, you have a budget to feed yourself and your family, but also, you can afford to pay for necessities, utility bills, taxes, and save for retirement.
Personal finance is more like a discipline
Keeping your personal finance in order will allow you to live a stress-free life, knowing that everything is in order, just as it should be.
On the other side, there are people whose personal finance skills are not the best. While some individuals try to keep everything on track, because of financial pressure, they tend to make the wrong decisions or sometimes skip important facts that could save them money on utility bills, credit cards, groceries, and even rent or mortgage.
When it comes to budgeting, you need to be frugal. Changing your lifestyle is the first step towards your financial stability.
Before you commit to getting your finances in order, you need to know how much income you have every month and how much you spend (total expenses). Setting this target gives you a structure to plan and find solutions to reduce expenses.
1. Step one – calculate your income and outgoings
When you know exactly how much you get paid every month or what amount of money you contract, the process will be easier to calculate where your money goes.
Take advantage of online tools that help you calculate your family budget easily, just by typing a few digits. The table below will show you how to calculate your monthly budget.
You can head over to online calculator to estimate your family budget in less than a minute.
2. Stay away from online shopping
Cutting down online shopping plays an important part in getting your important tips to improve your finances in 2020. We all live with basic stuff right now, and fashion items, shoes, and bags are not exactly a real necessity, right, given the actual circumstances.
Unsubscribe from all newsletters to avoid the temptation to spend and avoid social media, where you get targeted with specific ads that tend to provoke you to spend your money.
3. Get rather of debt as soon as possible
Before you save and get your finances back on track, I suggest paying off your debt first. Debt is the one that holds you from becoming financially organized.
Another reason to pay off your debt is to avoid high-interest fees, money that can be directed towards a saving account or some form of investment.
It might be tempting to choose a minimum payment for each debt; by doing so, you will never be free of debt because that’s what lenders want. Lenders are making their money from the interest that you pay every month.
This article from cnbs.com explains that the avalanche method is the most effective way to eliminate debt. You even have online tools to help you calculate debt repayment.
This is how the Avalanche Method works:
Write down all your debts, calculate which one has the highest interest, and pay the minimum balance for each; then, whatever extra money you have, you should add towards the debt with the highest interest.
There are cases when you cannot keep up with repayment, and that’s fine because many creditors are willing to negotiate. Phone each debt company and ask for advice and what options they have for you.
4. Cut down on bad habits/ addictions
Bad habits/addictions will drain your bank account faster than you think. Things like alcohol, drugs, cigarettes, and gambling are why your finances suffer. It might not be easy to get rather of addictions, but at least you can try and get help if it will make it easier for you.
You probably don’t realize how much money you spend on bad habits, but even quitting a single addiction can save you at least $50 a month. Adding that each month, at the end of each year, you save $600. That’s a lot of money that can be invested wisely.
5. Stick with a weekly shopping trip
I have always been living frugally, and shopping with a list helped me buy only what I needed. Since the lockdown started, I even became tighter with my money. I buy my groceries once a week from stores like Aldi, Lidl, and even Sainsbury’s sometimes, but only if I cannot find a product in the other stores.
Use cashback cards every time you go shopping. Choose stores where food is cheaper, especially canned food, buy in bulk as much as possible, and never go shopping when hungry. I learned this after I had a few bursts when I filled the shopping cart with unnecessary stuff.
When you are hungry, you instinctively buy as much as possible. I want to quote my partner when he tells me, “your eyes are bigger than your tummy.” When you are hungry, you don’t think clearly, so eating before you go for your weekly shopping is best.
6. Create a weekly meal plan
Planning your weekly meals is one thing that many people don’t want to follow. During the lockdown and even before, I made the decision to plan what I would eat for at least one week ahead.
It is obvious that cooking at home saves you an incredible amount of money, monitors your diet better, besides, you live healthier.
If you’re missing McDonald’s burgers and chicken sandwiches, you can buy frozen ones from any supermarket, stick them in the oven, and voila. Two homemade burgers cost me less than $2 compared with $12 -$14 when I was buying from McDonald’s. Avoid ordering food at home and buy takeaways only if it is necessary.
Any leftover fruits and vegetables can be packed in small bags and stored in the freezer ( if you go shopping after 8 pm, some supermarkets are selling vegetables and fruits at a reduced price, you can buy in bulk and store them in the freezer, following this procedure, it will save you quite a big chunk of money).
7. Review and eliminate unnecessary subscriptions
The subscription business model is very common these days. During the lockdown, you should review your credit card accounts and eliminate services you don’t use. You can subscribe back to services when your finances are in a better position.
Here is a list of some of the most common subscriptions you might have and which you might not need right now:
- Meal delivery subscriptions
- Gym memberships (you can find online accessible sources of information to keep your workout on track)
- Magazine subscriptions
- Bear razors box subscription
- Amazon and Netflix subscription services (do you want to pay extra to watch movies? Why not use your time to read books instead and learn new skills)?
- Review your mobile phone contracts and bill ( I had a nasty surprise when I realized that a dodgy company was charging me $6 monthly because they were sending me a premium text. I enrolled in a competition and didn’t know I would be charged. If you see extra charges, investigate them immediately and fight to get your money back).
8. Renegotiate your household bills
You’re missing a lot if you don’t negotiate your household bills. Many service providers are willing to work with their customers and offer better deals, especially if you have used them for years.
Phone bill: if you have a premium mobile phone plan, it is better to switch to a basic one; since you cannot travel outside the country, you don’t need a special roaming plan.
Cable/internet bill: My internet bill goes up like any other utility every year. Chances are that if you call your internet provider and ask for better deals, you can slash a large portion of the bill just because you asked (babies don’t get fed until they cry).
Insurance: Renegotiate all insurance plans. From car, house, boiler, electronics, and health insurance, you can get better deals if you research properly and telephone them and ask to speak with a manager. In this stormy period, you must hold tight to your money; insurance is taking a large portion of your monthly/annual income.
Utility bills: Here are included gas, electricity, water, and council tax. All these services are critical, and everyone needs them. Besides all of the mentioned, there is car servicing bill too. Owning a car has a set of responsibilities and monthly or annual bills. To reduce these bills, you have to buy a cheaper car or remove them all, use public transportation, or ride a bicycle.
Whether you have an outstanding bill or cannot afford to pay all at once, call and speak with customer service to see how they can help. If they cannot offer you a discount, at least you should arrange a monthly plan to pay your bills over a few months.
For example, in the winter, your gas bill is higher compared with summer; therefore, make a monthly installment to pay your winter bills during the summer; this process can be applied to the rest of the utilities. Check this post for 14 ways to get your home ready for winter and tips to save money on energy bills.
9. Start a side hustle
Relying on a single source of income should sound an alarm straight away. The future is very uncertain; therefore, a side hustle can save you financially if it happens to become unemployed.
A few ideas to create another income stream are:
- Selling unwanted items on eBay, Facebook marketplace
- Make and sell crafts such as body scrubs, soap bars, jewelry, and canvas. List your handmade creations on Etsy, Notonhighstreet.com, nuMonday.com, and a few other platforms
- Start a YouTube channel ( you won’t earn a huge amount of money from Google ads, but even $5-$10 a month will add up), Just like dividends
- Start a blog and apply for ad networks, or even buy a successful blog that already generates revenue
- Get paid to refer people for CPA ( cost per action) networks or affiliate programs
You might like to read:
How to save for a house while renting
The best passive income business ideas
Be sharp and create multiple income streams. If one fails, you’ll have others to back you up.
10. Avoid withdrawing cash
Unless you really need cash, you should pay with your cards for services and shopping. Some banks charge a commission every time you withdraw cash. Avoid any extra charges and always use cash machines from the bank you have your card issued.
11. Keep track of all receipts
Make a habit of keeping track of everything you spend, ask for store receipts and review them at the end of each month. You can use a mobile app also to track your spending and calculate the total amount for each month.
This sort of personal finance habit will also help you manage your money when you need to apply for a mortgage. The more you know about your spending, the better you can save and create a comfortable life.
12. Use all cashback points right now
Review all cashback cards and use the points before companies might change their terms. Supermarket points cards, pharmacies, petrol cashback, bring all of them out and use the points next time you need to buy something.
A few times, I bought beauty products from our local pharmacy, Boots, with the points I accumulated. Usually, I do this at Christmas when I buy presents for family and friends, but as things change, we need to adapt. Also, when buying something online, check for discount codes for that specific retailer. If you don’t, you are missing out on a good discount.
13. Choose a more competitive saving account
If you have savings and don’t earn enough interest, it is time to search the market and put your money to work for you. At the moment, very few banks will offer high interest on a savings account, but even 1% is better than nothing.
Use this calculator to simulate your investment earnings based on factors determined by your deposit, annual rates, inflation, and how many years you plan to save.
14. Review your savings and retirement schemes
Every year you should review your pension schemes. Whether you have a state or private pension, now is a better time to review what’s going into your retirement pot.
If your finances have been badly affected, you can contact a financial advisor for the best solutions for your pension schemes. Other than state pension, I prefer to rely mainly on the properties I own, and maybe I will add some more to my portfolio by the time I retire.
I ditched my private pension scheme ages ago and decided that what I got in my hand was safer; I could access the money from properties whenever I wanted or needed it.
Is not easy to get into real estate, but I was lucky enough to save at early age, and with a few strategies, I bought some cheap properties, which I renovated myself, with my own hands and my family’s help too.
When I look back now, I still cannot believe how much I have achieved and how much I have worked to be where I am.
If you can get on the property ladder, I suggest being serious and holding on to what you got. Buy an old cheap property rather than a new, newly built one and get your hands dirty; renovate it yourself. If you choose to go this way, you will save much money and gain experience for the next project.
15. Learn new skills
Learning new skills won’t necessarily help save money but will allow getting a better-paid job. Online courses are convenient, and you can study at your own pace. What skills you should learn is entirely up to you, based on your passions and what you see yourself doing in the future.
A few good courses you can study online are finance, building self-confidence, communication, making money online, or why not learning a new language.
A few trusted sources to find online courses are:
Udemy
Reed.com
https://onlinecourses.lse.ac.uk/
16. Keep a positive mind and stay confident
When life throws all sorts of problems at you, you should carefully consider what percentage of your mind is directed toward positive and negative thoughts. Sometimes you attract what you think.
Another interesting thing I always do is see the other half of the glass, and I advise everyone. Every bad situation has got a good side. Look into that one and focus on the good things that you want to happen in your life.
Practice meditation and repeat positive mantras, channeling energy to reach your goals and live a better life.
A few factors that will help you become better at managing your finances are:
- Stop procrastinating
- Quit bad habits/addictions
- Don’t blame others for your choices
- Read finance and money management books
- Encourage and help others succeed
All these money management methods won’t work if you don’t follow them every month
Ultimately, I would love to point out that living a frugal life is not easy; we all want to enjoy all sorts of luxury, but you have to ask yourself, what do you do to make that happen?
Learn from people better than you, and eventually find a coach to accelerate the learning process. Life is a long journey in which we constantly learn and evolve.
Let’s recap:
How to get your personal finances in order
- Step one – calculate your income and outgoings
2. Stay away from online shopping
3. Get rather of debt as soon as possible
4. Cut down on bad habits/ addictions
5. Stick with a weekly shopping
6. Create a weekly meal plan
7. Review and eliminate unnecessary subscriptions
8. Renegotiate your household bills
9. Start a side hustle
10. Avoid withdrawing cash
11. Keep track on all receipts
12. Use all cashback points right now
13. Choose a more competitive saving account
14. Review your savings and retirement schemes
15. Learn new skills
16. Keep a positive mind and stay confident
If you enjoy reading this article, share it with your friends, and if you have other personal finance tips, please share them in a comment below.
