Life is better when you’re on top of your finances. You feel more confident, secure, and relaxed when you’re not worried about money. Good financial health entails steady income, consistent investments, long-term financial planning, and consciousness in spending.
Evidence suggests that financial health is linked to both mental and physical health. Financial worries are linked to greater levels of stress and anxiety, both of which affect one’s physical health.
What is Money Management?
Money management is all about how you handle your finances. It entails planning big purchases, tracking spending, saving, budgeting and investing. Money management looks different for everyone. An individual’s debts, income, familial obligations, living costs, dependents, and interests all affect the way they handle their money.
Money Management Tips
Here are some simple, attainable ways to get a better handle on your finances:
Make saving a habit
Saving is a mindset. It’s not always about the amount or the frequency of saving that makes someone successful. Whether you put away $50 or $500 a month, you’re adopting a saving mindset and paying yourself first.
While it’s usually good to have a financial goal in mind with saving, you can figure out that goal later. Whether it’s a retirement plan, big purchase, vacation, renovation. business venture or something that’s still TBD, setting money aside helps you improve your financial health, regardless of what your financial goal is.
A great way to make saving a habit is to automate your savings. Remembering to transfer money into a savings account every week or month is just an extra task on an already busy day. Don’t just keep track of your savings within your everyday chequing account. By automating your savings, you don’t even need to think about saving.
Ease up on the credit card spending
It’s harder to spend money when you see it physically leaving your wallet. Maybe that’s why the average cash transaction is $22, while the average non-cash transaction is $112. Credit card debt is one of the most common forms of debt. Credit cards also tend to have the highest interest rates, making it easier to spend more money on your purchases.
The rewards points might be tempting, but try to think twice before swiping your credit card. At the very least, remove the automatic credit card information filling that phones and computers have. Or, take a walk before making a purchase to ensure you really consider whether or not you need that product.
Budget (or anti-budget!)
Budgets are financial plans that help you track your incoming cash and outgoing expenses. They help you to pay your debts faster, gain control of your finances, get more out of your money, decrease stress, and save more.
To make a monthly budget, make a list of your net income, and compare it against all of your expenses. If your income is lower than or only barely covers your expenses, you might need to rethink your spending habits. Without a budget, it’s easier to spend more of your money.
Using a budget is much easier if you do the following:
- Keep receipts
- Review your budget
- Limit spending
- Update as needed
Some people also opt for the anti-budget. With this method, one puts away their savings each month and doesn’t budget for anything else. As long as your savings are taken care of, you have the freedom to use your money however you please.
Always compare prices
Never buy the first product that you see. Always, always compare prices before making a purchase. You can become more aware of the market and save money by doing so. Whether it’s for a television, rental apartment, sneakers, groceries, or car, price comparison tools help you make more financially secure choices.
Improve your credit score
Your credit score helps you access loan products, like business loans and car loans, with reasonable terms. That includes lower fees and interest rates. With a low credit score, your options for lenders and products are limited.
The more negative marks you have on your credit report, the less likely you are to secure favourable loan terms. Lenders see you as higher-risk, so they charge more to lend to you. Higher interest charges mean less money for your budget.
There are plenty of ways to improve your credit score, such as through making payments on time, having diverse forms of credit, and achieving a low credit utilization ratio.
Be mindful – think before you buy
In 2018, over 63% of Canadians made impulse purchases, spending an average of $73 each purchase. Impulse spending is even worse in the US, with 89% of Americans making impulse purchases. It might feel good to splurge at the moment, but impulse buys can destroy your savings goals and compromise your budget.
It’s not hard to curb impulse spending. Try shopping when you’re level-headed (not emotional), and always have a plan for your purchase before entering a shop.
Your financial scenario won’t stay the same for your whole life, so neither should your money management practices. In life you’ll lose your job, get a promotion, have children, move cities, or change your lifestyle – you can’t plan for everything. That’s why it’s so important to be flexible in your money management, to account for life’s changes.
For example, if you make more money in one year than another, be intentional about that extra money. Don’t just do what you did last year before you had it.
Money Management Apps
Some people don’t have the time or the patience to keep track of their money management affairs. Luckily, there are plenty of money management apps to help you stay on track:
Mint: Mint helps you with both budgeting and credit monitoring.
YNAB: YNAB, or, You Need a Budget, offers real-time budgeting that you can share with a partner, personal support, and monthly reports.
Money management looks different for everyone. By being intentional with your spending and saving, you can successfully manage your finances and get more out of your money. If you’re struggling with poor money management and have a lot of debt, consider credit counselling. Find peace of mind knowing there’s a solution by talking to a trained counsellor today.