What does money mean to you? For some people it is purely a means to an end. For others, it’s a source of fear. Some people just see it all as abstract numbers on a bank statement. But what money really is, is a tool. It’s a thing which allows you to achieve what you want in life, and gives you choices. Whether it’s your ambition to purchase a family home, start your own business, retrain for a new career or travel the world, you’re going to need money to make it happen. It comes down to being clear on your financial goals and understanding how to make them happen. So how do you get started?
What Matters To You?
First of all, set some financial goals by working out what’s important to you with money – and then how much it will take to achieve that. Does money mean security or adventure? Do you want to save up enough to go travelling around the world for six months, or are you just set on maxing out your 401k this year? Perhaps you just want to buy some new kitchen appliances.
Once you understand what you want, do some research into the figures required to achieve it, so you have a realistic idea of the money you’ll actually need.
Revise Your Budget
If you need to make savings, the best place to start is with your monthly budget. There are two main routes to maximise your disposable income. Route number one is to make savings, go through your monthly spend line by line and identify where exactly you are overspending and need to cut back. Remember that it’s not just about cutting down bad financial habits. You can also make significant savings by revisiting fixed costs, such as your phone contract, electricity or broadband and either comparing suppliers to get a better rate or using negotiation skills to get a reduction on your current package. And while you’re at it, you should also make sure that you have any current savings in the highest interest savings account you can find, so they are also working harder for you.
Branch Out Your Skills
The second route to making savings is to increase your income. Many people are using the Internet gig economy to make extra money on the side from their main income. This could be anything from running a YouTube channel to flipping second hand goods as an eBay reseller, setting up an Etsy shop to sell handmade goods or finding additional virtual work in something like translation or being a virtual PA. There’s a whole range of things you can do depending on your personal skills and abilities. Creating an additional income stream allows you to live off your main salary while funnelling any extra money straight into paying off debt or saving, so it’s a smart move.
Improve Your Credit Score
Another way to save money that many people overlook is to reduce the amount of interest you pay on any debt that you have. If you’ve managed to run up some on a credit card or you have a loan to purchase a new car, then you’ll be paying back the money with an APR, or Annual Percentage Rate on top. The better your credit score, the lower the rate of APR you’ll generally have to pay. Banks and loans companies use your credit score to help them make a decision on you and how likely you’ll be to pay back the loan in full. If your score is bad, you’re likely to be given loans on a much higher rate – and that can mean paying back hundreds or even thousands more over the course of the loan than someone on a lower rate with a better credit score. Luckily, there are lots of things you can do to improve your credit score – from making sure you’re registered on the electoral roll to never making a late payment. It can take several months to a year for changes you make to show up – so check your score on a semi regular basis and report any anomalies.
Stay On Track
Once you have a clear idea of what you want to achieve and how you’re going about it, it’s time to make sure that you stay on track. And there are a whole raft of tools to help you do that. Using a money management app is a great way to stay in touch with your finances over the month. Some apps act as a virtual financial advisor, making suggestions on how to tweak your spending or prompting you to save. Others can round up your card transactions and deposit the difference in a savings account. Some making investing easy by letting you choose a simplified risk profile and choosing funds for you. Still others help you by categorising your spending and making it easy to see where all your cash is going. Smart financial management can be all in your pocket these days, so there’s no excuse not to be proactive about looking after those pennies.