Unless you’re a financial guru, chances are you struggle with keeping track of your money. It is completely normal to feel overwhelmed by your finances and you’re definitely not the only one.
Most people don’t give their finances a second thought until motivated to do so by an upcoming wedding, large purchase, or a natural disaster. But it is important to stay on top of your finances and luckily, it’s not as difficult as it seems to be.
Like with anything, all you need is a plan. Developing a financial plan can help you simplify your income and expenses and making managing your financials as seamless as possible.
1. Consider your long-term goals
Think about what your long-term goals are – it could be anything from planning your dream vacation to retiring comfortably. When working out your personal finances, it is important to know what your long-term (or short-term) goals are. The sooner you can start putting aside funds for your goals, the more seamless your financial routine becomes. Consider writing your long-term goals on paper or drawing up a vision board to help you imagine your goals.
2. Differentiate between needs and wants
In order to successfully start saving for your goals, it is important to distinguish between what are needs and wants. Your needs and wants may start to change as you consider your personal and financial goals.
Need: Something that is necessary, required or essential. I.e., something you cannot give up, like your rent.
Want: Something that you’d like, a nice to have, but not necessarily needed. I.e., those second pair of boots, even though you already own something similar.
It is important to evaluate your needs and wants when getting finances in order.
3. Create a budget
Creating a budget can seem like a daunting task, even scary, but is a vital step in knowing where cash is coming and going. A budget doesn’t need to include complicated spreadsheets of cash flow or balance sheets but can simply just start off in the notes section of your phone. It is more important to know when your money is coming in, how much is coming in, where your money is going out, and how much is going out than having a sophisticated tool to do so. A budget is important to help you figure out how much money is earned, saved, and being spent. From here, you can see your financials at a glance and make informed decisions on your income and expenses and allocate funds to other areas of spending.
Once you feel comfortable with tracking your income and expenses, you can switch over to tools that help you track, such as apps or spreadsheets.
4. Get into the habit of saving
We’d all love to save more and spend less, but that’s not always feasible. Savings don’t always need to be hundreds of dollars a month – it can be making small changes that help you save a little more. Consider making coffee in the morning instead of spending $2 every morning buying coffee, that could help save you up to $730 a year. Or cancel that extra streaming subscription you never use, but spend $10/month on, that could help save you up to $120 a year. These savings may not seem large, but these small changes can help you pad up those savings for the future. Also consider moving money from your chequing account to a savings account to ensure you don’t spend that extra money. Better yet, set up recurring payments to automatically transfer into your savings after each payday. Check in every month and you’ll be surprised to see the difference it’s made!
5. Consider going cash-only
Credit cards are convenient but can be harmful if you’re someone who struggles with money management. By switching to cash-only, not only do you get rid of the high-interest attached with certain credit cards but can also easily track your income and expenses. The biggest benefit of switching to cash-only is that you only spend what you have.
6. Spend consciously
Finally, it’s important to not fall into a habit of impulsive spending. Spending consciously ensures that you are aware of your financials and spend accordingly. It also means that you can occasionally treat yourself instead of just spending on the essentials. Occasional treats also mean you are not inclined to go on a spending spree when the urge arises.
Finances can be challenging, but don’t let that deter you from keeping track of your income and expenses. Gaining control of your financials is a task worth doing so as it empowers you to reach your goals. At the end of the day, keeping your finances in order will make you feel happier, more organized, less stressed, and give you a clear picture of your financial standing.