We would all love to get better control of our money, reduce our outgoings and increase our income. Without a plan of action, it’s easy to lose focus and see your finances go out of control.
Whether you’re looking to save for a big purchase, live more comfortably within your means or get out of debt, here are six ways to take better control of your money.
1. Reduce expenses
The first step in taking control of your finances is always to look at your expenses. Reducing expenses is something you can start right away to improve your cash flow.
Most people find they’re spending more than they think. If you’re not sure where your money is going, the first thing to do is get a clear picture of your expenses. This could mean whipping out a spreadsheet or downloading a money management app that categorizes your spending. If you recognize overspending on unnecessary things, then you can take action to reduce those expenses.
Beyond that, other ways you can reduce expenses include negotiating with providers to reduce your energy/utility costs or insurance. You could even go one further and swap out your expensive car, move to a smaller home or even remortgage if you can get a better rate.
2. Get more money in your pocket
This is always easier said than done of course. However, increasing your income is the next best thing you can do to improve your financial situation.
There are a few ways you can do this, the main ones being asking for a raise, getting a better job, or starting a side hustle. If you have been in the same job for a while now, perhaps it’s time to ask for a raise or even search for a new job. You could increase your take-home salary by thousands a year just from this one simple move.
If you want extra money in your pocket each month, a side hustle is a popular way to do so. There are lots of ways you can do this. There’s selling eBooks, opening an Etsy store, or doing freelance photography, writing, or graphic design.
3. Set clear financial goals
With better control over the money in your pocket, the next step is to control where it goes from now on. The best way to do this is to set clear financial goals.
This could be a savings goal, for example, save $X each month for a house down payment. Or it could be something like I want to spend $50 a month on fun activities or save $30 on groceries. Whatever your goals are, sit down and write them out so you remember them.
Try to be as specific as possible and create actionable steps to stay on track.
4. Find a budget that works for you
Budgeting will look different for everyone, so it’s important to find a method that works for you.
A popular budgeting method includes the 50/30/20. This allocates 50% of your earnings for essential expenses such as rent, 30% for fun, and 20% for savings such as 401ks. Whatever method you choose, make sure it’s realistic and achievable for YOU.
5. Build a buffer in your checking account
A buffer works like a mini emergency fund in your checking account. Aim to have one to two weeks of your income set aside in your checking account to protect you against unexpected expenses. For example, higher-than-usual expenses, overdrafts, declined transactions, or bounced payments.
This buffer is a simple way for some peace of mind that you won’t run out of money.
6. Save for those big purchases
The best way to save for big purchases is to start with a plan. Analyze all your current monthly income and expenses and see how much you can allocate to savings each month.
Once you have a realistic number, pick a set amount to save each month. If your income fluctuates, you could save a set percentage instead. Once you have that figure, set that money aside as soon as you get your paycheck. Don’t leave it to the end of the month, pay your savings account first to make it a priority.
The best way to start taking better control of your money is to have a clear idea of where it’s going - and where it should be going. Try out ThinkFlow for a simple way to control your spending and keep an eye on your cashflow.