Knowing where to start when it comes to tackling your finances can feel overwhelming. Here are tips for you to get control of your finances today from Steph a money blogger who is a bit of an expert when it comes to sorting out your money.
Should you prioritise paying off debt, saving for the future or building an emergency fund?
Should you be asking for a payrise, or taking on a new side hustle?
How do you even start to look after your finances, when your current income barely covers your needs? What about when you want to buy a new phone, how can you afford that?
But, regardless of your current financial situation, there are a few small steps you can take today to help you feel just that little bit more in control of your income and expenses – and hopefully help you build that safety net should you need it or buy those stunning shoes you desperately want!
So, grab a notebook, bring your bank statements, and let’s get to it, with these four easy and actionable steps to help you get control of your finances today.
Identify where your money goes
First up, you need to analyse your outgoings, to truly understand where your money is going each month. This is an important step in getting control of your finances. Look at things like your mobile phone bill, could you save money and make it cheaper?
Load up your bank statement for the last month, and write out on a piece of paper ‘Needs’ and ‘Wants’ as two separate columns. Next up, go through every single transaction from the last 30 days or so, and write out each one in either the ‘Needs’ or ‘Wants’ column.
‘Needs’ are the things you can’t really cut out – bills, housing, food, debt repayments, and ‘wants’ are the things you don’t have to have, but that you enjoy – Netflix, subscriptions, random Mini Egg purchases when you’re passing Tesco.
If you’re feeling particularly analytical, maybe consider recording the previous month’s needs and wants as well – and maybe even the one before that, giving you a three-month insight into your spending habits.
Create a budget
I know, I know – how cliché. But budgeting completely changed my life, and I will forever rely on one, regardless of how much my income increases as my career progresses.
There are a whole host of different budgeting methods out there, but my favourite is the Zero-Based Budgeting Method.
Zero-based budgeting (ZBB) involves allocating a role or purpose to every single penny you make – from bills, to fun money, to savings and everything in between.
Typically, it requires knowing what your income will be for that month and identifying what your expenses will be – including accounting for your needs (that we’ve already identified), wants (ditto), debt payments and savings, and making sure that, when you subtract this all from your income for the month, it comes to zero.
Once you’ve worked out what your needs are for the month ahead, you can then allocate whatever is left over to your wants, your savings (which we’ll be talking about shortly), and to paying off debt more quickly.
It minimises any temptation or risk to overspend, and can still allow you to have a ‘treat’ pot, a ‘just incase’ pot, and a ‘one day’ pot.
Every month is different, so it’s a good idea to get in the habit of analysing your upcoming expenses a few days before payday. Perhaps next month there are a lot of birthdays coming up, or a couple of school trips you need to pay for – in that case, you might cut down on debt overpayments, or you might even cut back on your treats for the upcoming month.
When you hear (or read!) the words ‘start a budget’ it can all sound a little daunting and bland – but I promise you, if done correctly, budgeting really can change your life. So, will you get control of your finances?
Freebie: Download the zero-based budgeting template I use every month, which has helped me pay off my credit card debt, build emergency and sinking funds, and treat myself whenever I feel like it here.
Identify areas you can cut back on
So you’ve identified where your money goes, and you’ve started looking into the right budgeting method for you.
But next up, you want to start looking at areas you can cut back on, so you have more cash to send to your savings/debt repayments – without necessarily sacrificing your quality of life.
Let’s start with your ‘wants’
Do you really need NowTV, Amazon Prime AND Netflix subscriptions? What about your beauty box subscriptions – can you cut them down to one per month? How about your food bills – by swapping supermarkets, could you still fill your trolley, for a fraction of the cost?
We moved from Sainsbury’s (where we spent approximately £400 each month) to Aldi, and now spend between £170 – £200 every month on our groceries. We still eat just as much – if not more – and we still pick up the occasional brand name (I won’t be told own-brand squash can compete with Robinson’s squash!) but the impact it’s had on our finances mean we’re comfortably able to move £200 to our joint emergency fund each month.
What about Spotify Premium? If you and another person in your household both have a Premium account, why not merge them as part of their Duo package. You then swap two separate monthly payments of £9.99 into one joint payment of £12.99.
It’s not about necessarily denying yourself something you truly enjoy, but can you make some changes which can reduce the outgoings?
So, onto your ‘needs’
You’d think these would be less flexible wouldn’t you?
Wrong.
List out all the bills you pay each month, along with the contract end date if you know it. If the date is approaching, you’re in a very strong position as you can negotiate on your next contract.
Let’s take your utilities, for example, or your TV package. If you phone them up and ask to be put through to their ‘Retentions’ team, it’s their job to try and keep you as a customer. My advice would always be to do your homework before phoning, to see if a competitor has a ‘new customer promotion’ currently running. If it does, you can use this as leverage with your existing supplier – who will want to fight to keep you.
And don’t forget, if you don’t like the offer they’re putting on the table, you can always walk away and sign up with somebody new (the only exception here could be your water supplier, so it’s best to look into your local provider first).
What about your mobile phone contract? If you’re happy with your phone and your contract is coming to an end, could you consider moving to a SIM-only deal at a heavily reduced rate? Or maybe you want a new phone and contract altogether. If that’s the case, call your current provider to find out the best deal they can do, and if you can find something better elsewhere, don’t be afraid to walk away!
A little bit of preparation and homework really can save you a whole host of cash on your needs and is well worth the time to control your finances.
Create an Emergency Fund
If you take anything away from this post, it should be that you need to create an emergency fund.
An emergency fund is a pot of cash you have available to you in just that: an emergency.
It could be a job loss, a health issue, an unexpected expense or a paycut, and it’s there to fall back on when you need it most.
Opinions vary on what is a good amount to have within your emergency fund, with most people agreeing you should start with a £1000 target, and ideally eventually work up to 3-6 months’ worth of expenses.
Now you know where your money is going each month, and you’ve created your budget, you should know what you can afford to move into savings.
If you’re paying off debt as well, it can be incredibly tempting to just put whatever you have leftover straight into your repayments – but actually, I’d argue it’s still worth sending a small amount to an emergency fund each month.
Even £50 a month can make a huge difference when you come to need it.
Top Tips for Creating an Emergency Fund:
Look at keeping your emergency fund in a separate account than the one you’re paid into to avoid any temptation to touch it – but make sure it’s still an easy access account.
Move even £10 into your emergency fund as soon as the account is open, to get yourself into the right mindset.
Keep a progress tracker – it’s seriously satisfying to colour in every block as you move towards your goal. You can find progress trackers online – use Google for free ones, or head to Etsy for ones that will cost you a couple of quid.
As part of your monthly budgeting session, work out what you can afford to move into your emergency fund, and do this straight away on payday. Chances are you’ll have heard of ‘paying yourself first’, and that’s exactly what this means – move cash straight into your savings on payday, so you don’t fall into the trap of saving whatever is leftover at the end of the month. Prioritise yourself, and looking after your family’s needs in an emergency.
Don’t be hard on yourself! If you need to touch your emergency fund for whatever reason (these things happen!) instead of looking at it negatively, change your mindset – if you hadn’t put all these systems in place, the situation that had you reaching for your emergency fund could have got you into debt instead. Once you’re able to, start contributing to your emergency fund again to save it from dwindling.
If you don’t think your pay packet will allow you to build an emergency fund, look at other side hustles you can do from the comfort of your own home alongside your 9-5. I built up most of my emergency fund when I was fresh out of university, making £15,000 a year. There was no way I would have been able to build a solid emergency fund on just that wage with the outgoings I had, so instead, I side hustled. Surveys, matched betting and selling on eBay are all great places to start!
Final Thoughts on Getting Control of Your Finances
If you’ve read through this post, and put these tips into action, you should now have a budget method in place, an emergency fund set up, and you should know exactly where every single one of your hard-earned pennies goes.
Sure, it can feel a little dull working through your expenses and setting up a budget, but I promise you, nothing feels better than being able to sleep again after you’ve experienced ongoing money worries.
Regardless of your situation, it really is possible to get control of your finances with a little homework, and a bit of planning. And maybe a little side hustling from your sofa.
Here’s to building financial security!
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Steph is a UK Money Blogger over at FundingHerFreedom.com. After trying her hand at pretty much every side hustle going, she was able to fund adventures to 26 countries (and counting), save for a house deposit (she’s not yet taken the plunge to actually buy!) and build a healthy emergency fund (whilst on a £15,000 wage!) For more money-saving and money-making tips whilst she strives for financial freedom, head over to the blog or find her on Instagram (@FundingHerFreedom) and Twitter (@FundingHerFree).
