5 steps to less financial stress and better financial organisation

Money, or so the saying goes, is the root of all evil. Of course, that statement can never be taken as true. But what is true is that lack of money management is a source of misery for many. To a greater or less degree, we are all seeking less financial stress in our lives. In this article we’ll cover 5 simple steps to help you manage your finances better to reduce stress. 

Reports suggest that arguments and disagreements about money are one of the major contributing factors to divorce and relationship breakdowns. For some, there may be the option to increase their income.

But when getting a pay rise isn’t possible, revisiting a monthly budget and organising finances is a good solution. Taking control of these areas of your life can open up the possibility of improving your financial wellbeing and increasing happiness levels. 

Times have been tough for many households, especially over the last 12 months or so. For those who were perhaps already struggling, the onset of the pandemic may have pushed them further into a worrying position.

While there may be situations that require expert intervention and advice to overcome, often there are simple steps that can be taken by individuals to correct their course. Being able to take control and organise your finances can save you literally £1,000s every year. These savings can be used to pay down other debts or even be used towards treats for you and your family.

Here are 5 simple steps that you can take to free yourself from financial stress and to get your finances under control.

1. Learn how to budget 

Many households in the UK have set themselves a monthly budget and this helps them keep control of their finances. There are certain areas where every household needs to spend each month.

Being able to prepare for upcoming payments means you are far more likely to have the money in your account at the time that it’s needed. Having a budget, and sticking to it has numerous benefits such as:

• You’re more likely to stay out of debt
• You’re more likely to protect your credit rating
• You can identify where you can save money 
• You’ll be better equipped to save money 

To start planning a monthly budget, you’re going to need details of your income and expenditure. There are certain areas where these amounts are fixed – such as your income. This is usually a set amount that comes in on the same date each month. When you’re looking at your expenditure, you’ll need to consider:

• Utility bills
• Food costs 
• Insurance
• Travel – fuel or public transport 
• Leisure activities 
• Gifts for friends and family

Once you know what your incoming and outgoings are, you can clearly see if there are areas where you need to cut back. It may well be that you are overspending on food costs each month, or perhaps you’re going overboard with gifts.

Think about how much you actually need to spend in each of these areas and stick to it. There may be areas where you can pay less to reduce your overall outgoings and have less financial stress. A free budgeting tool is available from StepChange, the debt charity.

2. Review loans and credit cards

Credit cards and loans certainly have their place. The truth is that using credit is neither a good nor a bad thing. What makes it one or the other is how it’s used. 

If you are using your credit cards as an extension of your income in order to survive, the chances are you’ve slipped into a vicious cycle.

Have you checked how long it will take to clear a credit card balance when you are only making the minimum payment each month? If you do, it’ll become clear that it’s essentially a trap that gets increasingly difficult to get out of.

Reviewing exactly how you are using your lines of credit, and how you are repaying them, is a major step forward to improving your financial well being. 

Perhaps you could reduce how much you pay by switching credit card providers and taking advantage of cashback offers and lower interest rates.

There are times when it may be worth looking at consolidation loans. This has the benefit of seeing all your commitments ‘bundled’ into one, which can make it easier to stick to a monthly budget. If you consider this option, it’s important to be disciplined. It can be easy to start using the credit cards again once you have cleared your balances.

But then you’ll end up paying these credit card payments plus the consolidation loan payment each month. This leaves you in a worse financial situation than when you started.

3. Have an emergency fund

One of the biggest financial stresses is when you have an emergency but no way of paying for it.

It’s almost guaranteed that these emergencies only happen at the point in the month when your bank balance is flailing and payday is still a couple of weeks away. Emergencies include a boiler break down in the winter or your car, which you need to get to work, needs a repair.

It may be tempting to extend credit lines when you need money quickly, but this will always have to be repaid and of course, there will be interest on top. For some, however, their credit rating won’t allow them to take this option. 

Short of your employer being able to pay you earlier in the month, the best way of dealing with these emergencies is to prepare for them and organise your finances before they happen.

If you are sticking to a monthly budget, then there should be money leftover at the end of each month. Yes, we all deserve a treat at times, but being smart with this money can bring its own rewards.

Opening a savings account and committing to making regular deposits means that you’ll soon build-up a fund that can be a lifesaver when it comes to emergencies cropping up. Knowing that funds are there for when you need them can dramatically reduce financial stress.

4. Use comparison sites

The internet has brought endless benefits and opportunities and one of those is the ability to save money with ease.

With households tied to certain payments such as car insurance, energy suppliers, and home insurance, it’s often too easy just to stay with your current provider. Some people stay with the same provider for years, partly because they believe that they are receiving a great service, but partly because they believe that changing would be too much hassle.

Comparison websites take all of this hassle away by letting you compare a great number of providers in just a couple of minutes. Importantly, getting the best deal can save you a lot of money too. 

When it comes to looking at ways to prepare for payments and organise what’s upcoming, these websites can be hugely beneficial.

By comparing the prices of a whole host of providers (for example insurance and utility companies), you can quickly and easily see where you can save money. Often people are able to save £100s each year by switching to a cheaper provider.

What’s also great is that you don’t need to remember to carry out the same process when it comes to your renewal. These sites will email you and prompt you to go and get new quotes.

Spending just a few minutes each year can save households a substantial amount of money. This money can be put into a savings account or rainy-day fund, meaning you won’t have to stress when an unexpected bill comes along. 

5. Ask for help

One of the biggest but often the most difficult steps that you can take towards less financial stress is to ask for help.

Sometimes that can be as simple as being open and honest about your financial situation with your partner or a family member. When financial stresses increase they can reach levels where your judgement is clouded.

A third-party can spot solutions that you may have missed and give you valuable perspective. This could even be as simple as them helping you create your monthly budget. Certainly, if you have a partner they should be part of it anyway as the whole household needs to commit to a monthly budget. 

There are times though when finances reach a stage where you can’t see a way out. This is nothing to be ashamed of and is not something that should be ignored.

In the first instance, an open and honest conversation with creditors can result in them lowering your payments or putting them on hold. Many creditors are far more supportive and understanding than is realised. Early and regular communication is key in these types of situations, so be sure to contact them.

If this isn’t possible or still doesn’t help your situation, it’s recommended to get in touch with one of the debt charities. They offer free, impartial, and confidential advice. Regardless of the outcome, opening up about your financial problems can be a huge weight off your shoulders and give an overwhelming sense of relief. 

How we can help

With Openwage, you can access a portion of your gross monthly salary that you’ve earned so far during that pay period. This can help you manage unexpected expenses that crop up between paydays. Why not take the first step and Refer your employer to Openwage today so that we can tell them about our service (you can stay anonymous if you like).

The information in this article is for general information only. It does not constitute professional advice from Openwage. Openwage is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the information in this document relates to your unique circumstances.