Here is a great article I came across, enjoy.
If you are the kind of person who struggles to manage your finances, it might be tempting to imagine that some people are just born with a magic ability to be good with money. The fact is, those people are no different to you – they still had to learn good habits. It may be that they got off to a decent start with the example set by their parents, but they still had to carry out the two steps of habit formation: learning and repeatedly putting into practice.
The good news is that anyone can create new habits at any time. Scientists say it takes somewhere between one and two months to establish a new habit.
Here are some of those healthy money habits used by financially savvy people that you too can learn and start to put in action right now:
Create a budget – and stick to it!
There are all sorts of ways of setting a budget – don’t get bogged down. Choose the type of budget you think will work best for you and make sure you use it religiously. A monthly budget is probably the easiest route to follow and is most likely to fit in with your existing regular outgoings and income payments (if you are employed).
Your budget is the number one most effective tool in your financial armory, a powerful weapon against getting into money trouble. So don’t think of it in terms as a restriction – it will actually help free you to live the sort of life you want.
Cement budget-making as a habit in your life by putting the date for making a new one into your diary and making sure you sit down and do it. If you have a partner, it is important to agree to do your household budget together so you are both on the same page when it comes to spending, saving and paying off debts.
Track your spending
How often have you got to the end of the working month and wondered where on earth all your money went? Well, now is the time to find out.
The easiest way to do this is to write down every single penny you spend – this might sound tedious but it is by far the best way of facing up to what is really going on. Nearly everybody is surprised – often even shocked – by exactly where their money is going when they see it all set out in front of them. Often we spend on autopilot without even really registering what we are doing, particularly with today’s quick and easy payment systems such as contactless and automatic apps.
Make it a habit to carry a small notebook with you where you write down everything you are spending. There are also apps you can use to keep track, if you prefer. This way you will be fully aware of where you stand and you will be able to put on the brakes long before you start to head for trouble.
You can also feed this new knowledge back into your budget-making process, enabling you to set more realistic targets.
Spend less than you earn
Sounds obvious, right? But plenty of us don’t stick to this basic rule. Some experts say this is the most important principle to live by if you are going to become financially successful.
Hopefully you will already have set your personal budget and that should have given you a clear idea of what you can afford to spend within your given timescale.
If you consistently spend less than you earn, it frees up money to make bigger payments on your debts, which should be your priority. Over time, your debts will reduce, freeing up even more money to make even bigger debt repayments and eventually dramatically reducing your monthly outgoings for good.
Use your budget to plan to reduce expenditure so you are consistently spending less than you earn and use ‘extra’ income, such as bonuses or gifts, to pay off more debt.
Cook at home
We all know how easy it is, particularly after a hard day at work, to go out to eat or send for a takeaway. But even if you only do this once or twice a week, it quickly adds up. Cooking at home more often is a win/win situation – not only will it save you cash, it is much healthier.
Making you own meals doesn’t have to be complicated or time-consuming and you don’t need to be a master chef. There are masses of resources out there – take advantage of free online recipes and search for ideas for cost-effective, simple menus.
Planning your meals – including breakfast and lunch – for the whole week will save you time and money. It is too easy to overspend if you are buying food on the fly every day. Set a grocery budget, write a shopping list and keep to it.
Cooking at home most of the time means that when you do go out to a restaurant or order that blow-out takeaway, it truly feels like the special treat it should be.
Question your spending
Take the impulsivity out of spending by applying the 48-hour rule. We’ve all been there – bought something expensive on a whim, only to get home and realize we don’t even really want it.
The 48-hour rule applies to spending above a certain level – you decide the limit, e.g. over £50, £100 or £200 – and give yourself two clear days to decide whether you really want the item. If you walk away from the store, you are unlikely to go back if it was an impulse decision – if it turns out to be something you really do want or need, it won’t be a hardship to go back after 48 hours. If you have a partner, agree between you to stick to the same limit – no more regrets!
Start saving for future expenditure
Plan now for expenses you know will be coming up, such as Christmas, holidays, servicing the car or wedding gifts. Write down how much you think you will need to spend, break it into small amounts and then put the money aside each month. Ring-fencing finances ahead of time makes life much less stressful.
Reframe what spending means to you
Many of us turn to spending for comfort. If we’ve had a rotten day at work or argued with our partner, it can feel soothing to treat ourselves to ‘something nice’: a packet of sweets, new clothes, an armful of glossy magazines or an expensive bottle of wine. This might work for a bit, but the fact is these things are not truly nourishing and the resulting blow to your bank balance, if done repeatedly, is actually likely to make you feel worse in the long run.
Financially smart people don’t do this. Start to create healthier self-care habits. Remind yourself how awful you feel when you overspend, and commit to not going there. Instead think ahead about other ways of getting some comfort. Phone a friend, go for a run, workout, promise yourself an evening just for you with a long bath and a good book – basically anything that makes you feel good, but doesn’t cost much. You’ll save money and have better emotional health too.