Personal finances: 6 top tips for better money management
The state of our personal finances has a major impact on our lives. Poor money management can result in stress and worry. With these 6 top tips for better money management, you can create a new sense of financial wellbeing. We’ll also show you how on-demand pay can be a useful tool for financial wellbeing.
Side-stepping poor financial habits is a vital part of keeping control of your finances. Nobody sets out to get into bad habits, but once they’re there, it can be hard to kick them.
Money mistakes cost you in more ways than one
If you ignore where your personal finances are heading, then it can lead to problem debt. Nobody wants that, or the stress and constant worry that often comes with it.
It doesn’t take many slip-ups with managing your money to set you back and make your financial goals harder to achieve. A missed payment here, a late one there, and suddenly your credit rating can take a tumble.
If you have a bad credit history, opening an account can be more difficult. If you’re saving up to buy a house, then your mortgage options might be limited too, especially if you have black marks on your credit file.
It’s important to set time aside to manage your personal finances. Get into the right frame of mind when it comes to money and you’re halfway there.
The benefits of money management
Taking control of your personal finances brings a whole host of benefits.
Missing important payments or not having enough for everyday essentials can make you feel stressed and anxious. In contrast, managing your money effectively gives you greater control and helps you feel empowered. It puts you in the driver’s seat so you can steer the direction of your life.
Being in control of your finances means that:
Unexpected expenses don’t cause you stress because you have enough savings
You can budget for treats for you and your family
You can keep your credit score looking healthy by never missing a payment
You can make long-term plans for your future such as buying a house, working less, or retiring
You can achieve a sense of financial wellbeing
If you want to stay in control of your personal finances and ensure that you’re developing the best financial habits, here are six money management tips that can help.
Tip#1: Make a budget and stick to it
We know it might not be everyone’s cup of team. Who wants to sit down and list all your expenses when there are so many other more exciting things that you could be doing?
Admittedly, it may not be the most interesting way to spend an evening, but making a detailed personal budget is seriously worthwhile.
Take the plunge and make a budget
Making a budget is going to take some effort. Sticking to that budget is going to take even more. But when you see the benefits that it brings, you’ll understand why a good budget can be your best friend.
Developing good financial habits such as budgeting will help you:
Feel more in control and empowered
More likely to stay in the black – and avoid getting into debt
Less likely to miss important payments
Deal with unexpected costs and bills
Secure a loan or a mortgage because you’ll have a good credit score
Save up for treats such as holidays or a new car
Avoid financial worry and stress
Making a budget can be fun
When these kinds of financial wins sink in, suddenly it becomes clear why the work required to create a budget is worthwhile. There are plenty of ways to inject fun into creating a budget. Get creative or try doing it with a friend.
MoneyHelper has a free budget planner that shows you a breakdown of your finances.
Tip#2: Make your budget work for you
Setting a budget that matches your salary or income is a great first step towards developing positive financial habits. If you’re going to stick to your budget though, you need to make sure that it works for you.
Budgeting is about gaining and taking control, not about going without. What works for you will be different to what works for others, so be honest about what you need and what you want.
Reflect on your expenses
Once you’ve created your budget, make time to look where your salary goes each month. Break down your spending into categories such as food, socialising, and bills. This makes your spending habits as clear as possible. It also becomes easier to see where you need to make some changes.
Sometimes looking at your spending can be a little scary. Often we don’t realise quite how much we are spending in certain areas. That is why budgeting and reviewing your spending regularly are so important when it comes to gaining financial control.
Find ways to cut your spending
With your budget in hand, it’s time to see where you could be saving money, such as:
Travelling expenses – could you walk or cycle some of the time?
Eating out – perhaps this could be a treat once in a while rather than every week?
Clothes – think about what you really need
Subscriptions – could you cancel any unused subscriptions such as gym memberships?
There is no need to deprive yourself of life’s little luxuries.
Tip#3: Cut your bills
Bills are one of those things that are unavoidable. After paying your mortgage or rent payments, your bills will be the next largest monthly expense. On average we pay around £234 a month to cover these.
This figure only covers the basics such as:
In addition to these, there’s council tax, car insurance, and home insurance to consider. Looking at all your bills together, you’ll see that they account for a sizable portion of your outgoings.
Shop around for the best deals
Today it’s easier than ever to shop around for a better deal on your bills. The rise in comparison websites means that you can check out 100s, if not 1000s, of providers for anything you can imagine. Whether it’s insurance, energy, broadband, or phone, chances are there will be a cheaper deal out there.
Even if you’d prefer not to switch suppliers, it’s still possible to save on your bills. Phoning your supplier to ask for a better tariff can result in a significant saving over the course of a year.
Save little and often
People with good financial habits make a point of saving where they can rather than just accepting what they are currently paying. Small savings add up, so it’s always wise to check all your bills and see if you can get the same service for less elsewhere.
Tip#4: Monitor your bank account
Part of developing good money management habits involves checking your bank statements. If you don’t know what’s coming out of your bank account each month and when, you’re more likely to overspend and end up falling short when a bill is due.
Regularly checking your bank account means that you know how much you have at any given time. You can be confident that you can pay your bills on time and stick to your budget in areas like eating out or the morning coffee-run. Some banks will now allow you to set up alerts to help.
Check for low balances
These alerts will let you know when your balance goes below a certain level. They will also let you know if there are insufficient funds to cover an upcoming direct debit.
This gives you the chance to get more funds into your account and cover the payment. This helps you by allowing you to avoid missed payments (and potential charges associated with it) and protect your credit score.
Check when your bills go out
Most people have various bills coming out of their account at different times of the month. That’s fine, but it does make it harder to keep track of how much you’ve got.
You may be able to group most bills to come out at a certain point in the month. This means that you’ll be able to keep better tabs on your money.
Then, if you know that your account is running low and you’ve got a bill to pay, you can decide what happens next. Do you let the payment fail or access some of your earned pay for a fast injection of cash?
Use on-demand pay to tide you over
If you realise that you don’t have enough for an important payment or bill, you could consider using on-demand pay. Openwage gives you instant access to your earned pay for a low fee.
On-demand pay from Openwage allows you to access your earnings to settle a bill without resorting to loans or credit cards. Most of these charge extremely high interest rates and damage your credit score.
Importantly, on-demand pay isn’t not a loan or any form of credit, so there’s no interest to pay and it won’t affect your credit score.
With on-demand pay, you can tap into your salary that you’ve already earned without waiting for your usual payday. This provides a convenient way to get a little extra to tide you over.
Tip#5: Keep a financial diary
Good money management means knowing what’s around the corner, financially speaking. You can’t control unexpected expenses (although you can put money aside for them), but certain expenses come around like clockwork.
Know your upcoming expenses
By keeping a financial diary, you can track and plan for regular expenses. Generally, we know when our internet contract is due to expire, when our insurance will renew, and when the car is due its MOT. We also know when birthdays are approaching as well as any other celebrations.
Put money aside to cover them
Knowing when these events are approaching means that we can plan for them. Instead of expenses like insurance renewals creeping up on you, you’ll have time to put money aside to cover them so you won’t be left short.
Being organised pays off
Planning ahead when it comes to your expenses also puts you in a better position to negotiate with providers. You can get a better deal on your car insurance renewal if you compare prices well ahead of when your existing insurance expires.
There are times however that despite the best laid plans, you find yourself with a bill you weren’t expecting. Services like on-demand pay provide a fairer and more responsible alternative to payday loans, credit cards, and overdrafts.
Tip#6: Build up a savings pot
People in Britain have got a little better at this over the last year or so. The pandemic created 6 million ‘accidental savers’ – saving as a result of not being able to spend. If you’re one of those accidental savers, it’s a great habit well-worth continuing with.
Solve unexpected problems easily
Having savings to fall back on means that you are prepared for the unexpected. Like the moment the boiler breaks down or the car needs an urgent repair. Instead of causing stress and worry, these events can be easily-solved using your savings.
High-cost credit isn’t the answer
But not everyone has got the savings habit nailed. Without savings, some people may resort to payday loans and credit cards. These may seem a great way to deal with an emergency, but the reality is quite different. High-interest rates and unreasonable terms trap people into a vicious cycle of debt.
Use on-demand pay as a helping hand
On-demand pay is a cheaper and safer alternative to payday loans and credit cards. On-demand pay with Openwage isn’t a loan, as you can only access the money you’ve already earned. With only a small fee to pay, Openwage offers a cost-effective and responsible means to access a little extra funds ahead of payday.
So, now you’re equipped with these top 6 tips for better money management, you can start putting them into practice!
There are lots of useful online resources and tools to help you continue your money management journey. Check out MoneyHelper and if you need free and unbiased debt advice, StepChange is a great place to start.
Get your employer on board
If you’d like to access your salary when you need it, then why not recommend Openwage to your employer? Refer your employer (anonymously if you prefer) by completing this short form. There’s no cost for employers to offer Openwage to their employees.
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.
Openwage Limited does not currently carry out regulated activities and is not authorised or regulated by the Financial Conduct Authority.
Openwage is a distributor of Modulr FS Limited, a company registered in England with company number 09897919. Modulr FS Limited is authorised and regulated by the Financial Conduct Authority as an Electronic Money Institution (Firm Reference Number: 900573)