It can be difficult to know whether you’re making good financial decisions or not, especially if you’ve never received any advice or education on money management.
This guide will give you some top tips on how best to make sound money decisions and how to better deal with your finances if you’re finding it difficult.
Understand your finances
Before taking the steps to improve your money management skills, it’s important to first understand your finances and where your money is going.
It’s good to get into the habit of identifying your monthly income, then working out how much you need for bills and savings, using what’s left over for your spending.
Creating budgets allows your financial goals to be more easily attainable, laying everything out in front of you to ensure you can see where exactly your money is going.
The 50/30/20 framework is a great place to start when it comes to budgeting. The idea of this approach is to use 50% of your earnings on bills and essentials, 30% on spending and 20% for savings.
Building up your savings account or starting an emergency fund pot will give you peace of mind if anything were to occur where you needed some extra money. Having a safety blanket will ease the stress and have you set up for a rainy day.
Take time to think before spending
A huge factor when it comes to making better money-based decisions is resisting the urge to splurge unnecessarily. The way we feel on a day-to-day basis can significantly impact us when it comes to spending, with many of us turning to retail therapy to cheer ourselves up.
Using the Three Day Rule is a great way to try and control your spending habits. This works by the individual choosing not to buy anything they would only use once – for example, a takeaway or a coffee.
Instead, if you’re wanting to buy something, you should wait three days to consider the purchase, and only go ahead if you still want it.
If you’re needing to make a big purchase but will struggle to pay it upfront, you may be able to manage a loan better so you can spread the payments across a certain period.
Seek advice
A great way to ensure you are making the right financial decisions is by seeking help or advice from experts in the know. There are plenty of resources and ways to get good financial advice that won’t end up costing you the earth.
Citizens Advice and the Money Advice Trust are both great free resources for you to use, offering sound financial advice to help you if you’re struggling.
