Looking to improve your financial management? Smart financial management can improve your quality of life and help you build toward a bright future, but it is also one of the most challenging parts of adulthood. This is particularly true in the current economic climate with high cost of living. Fortunately, there are a number of strategies that you can utilize that will help you improve your financial management and improve your quality of life.
Whether you are struggling to make ends meet, saving to buy a house, or simply looking to improve your future, here are a few strategies that are worth employing.
Go Through All Of Your Regular Expenses
A sensible starting point is to list all of your regular expenses. You can then weigh the total of these up against your total household income, which will give you an idea of whether or not you are living within your means. You can then go through all of your regular expenses and find ways to make savings. When you reduce your expenses, this extra money can be put to smart usage and help build wealth. A few ways to reduce your regular expenses include:
- Shopping at a cheaper supermarket
- Buying supermarket own-brand goods
- Buying in bulk
- Buying second-hand
- Cutting back on luxury items
- Walking/cycling instead of driving
- Cutting back on subscriptions
Establish Financial Goals
It is also important to establish financial goals. You need to carefully consider how you want your life to look in the short, medium, and long term so that you can create a plan that will help you achieve these goals. If you want to retire early and travel the world, your plan will be much different from someone with more modest plans.
Use The 50/30/20 Rule
Creating a budget is a great way to control your spending so that you can make smart decisions and build toward your goals. One of the most popular options is the 50/30/20 rule, which can be relatively easy to implement. Essentially, this involves 50% of your take-home pay for essential costs (rent/mortgage, food, bills) and 30% for non-essential spending (clothes, nights out, takeaways). The remaining 20% will then be used for debt clearance, saving, and/or investing. The great aspect of this budget is the fact that you can adjust the percentages based on your goals and situation.
Build An Emergency Fund
One of the most important financial planning strategies to use is creating an emergency fund. You should have an emergency fund with at least three months worth of expenses kept in an easy-access account. This emergency fund can be used in a number of situations, such as if you lose your job or have a sudden, unexpected large cost, like a household repair. Life is unpredictable, but having an emergency fund can provide a great deal of reassurance, knowing that you will be ok if there is an unexpected situation. You could also use a high-interest, easy-access savings account to grow the money over time (hopefully, you will not have to touch it, allowing it to grow from compounding).
Pay Off Debt
It is also important to prioritize debt clearance when creating a financial plan. Debt constantly drains your finances, making it hard to start working toward your goals even if you save a lot more money. You should look to clear any high-interest debt first and look into debt consolidation as a way to simplify debt management and possibly make savings. It is also important to avoid taking on any new, unnecessary debt.
Diversify Investments
Investing is one of the best ways to build wealth for the future. It is daunting at first, but investing can transform your financial well-being over the long term. The key is to diversify your investments so that you are spreading risk and do not have all of your eggs in one basket. One of the best options for beginners is to invest in an index global tracker, which is essentially a way of investing in a large group of companies in a particular market index, such as FTSE 100. With your investment spread out across so many companies and industries, it greatly reduces risk. The earlier that you start investing, the better, as your money will have enough time to compound and grow.
Take Out Sufficient Insurance
It is better to be safe than sorry when it comes to insurance. You need to consider the kind of insurance you need in your life to benefit from financial protection and peace of mind. A few common types of insurance for individuals include:
- Health insurance
- Life insurance
- Car insurance
- Homeowners/renters insurance
- Pet insurance
- Smartphone insurance
Build Up Your Credit Score
A good credit score can make a massive difference in your life, especially when buying a home. Therefore, your credit score is not something that you should ignore. It is wise to check your score periodically so that you can determine if you need to take action to boost your rating (as well as check the report for errors). It is possible to improve your credit score, but it can take some time. A few of the best ways to improve your credit score include:
- Pay bills on time
- Close down unused accounts
- Be cautious with credit inquiries
- Use low credit utilization
Budget For Hobbies
It is certainly important to reduce your spending and make changes to your lifestyle to achieve your financial goals, but you do not want to sacrifice your happiness. Therefore, it is vital that you set some money aside for hobbies and enjoying your free time. Hobbies are incredibly important for mental health and well-being, so they must be part of your budget. Without these hobbies, life would be less enjoyable and could even lead to reckless spending as a way to make yourself feel better.
Having a few different types of hobbies, including active, social, and solo, is also a good idea. In terms of solo hobbies, online blackjack can be a good option. You can enjoy playing online blackjack while relaxing at home, so you do not have to worry about high expenses with this hobby. Online blackjack is also a thrilling hobby that brings excitement to life. Places like jackpotcity.com have a number of different games that you can try, including live online blackjack, which allows you to play against a real-life dealer and with other gamers.
Have A Retirement Plan
It can be hard to think about retirement when you have so much going on in life, and the cost of living is so high, but you do need to have a retirement plan. Retirement should be a special time in your life, allowing you to do exactly what you want after a long career, but many people neglect retirement planning and end up in a difficult financial situation later in life. As mentioned before, it will depend on the kind of lifestyle that you want to lead at this time in your life, so you need to think about your goals and then develop a plan. You may find it helpful to speak with a financial advisor who can offer tailored advice and develop a plan to help you achieve your goals. A few best practices for retirement planning include:
- Saving as early as possible
- Maximizing contributions to employer-sponsored plans
- Contributing regularly to individual retirement accounts
- Invest
Maximize Your Earning Potential
A lot of focus is placed on reducing your spending when it comes to financial planning, but this is not your only option. You should also be looking to maximize your earning potential, which can make it much easier to achieve your goals and improve your living standard. It is also exciting and rewarding to earn more money. One of the best ways to do this is with career development, allowing you to climb the ladder. A few other ways to earn more money include:
- Asking for a raise
- Switching jobs
- Taking on a second job
- Freelance work
- Selling unwanted possessions
Conduct Regular Financial Audits
Finally, you should conduct regular financial audits. You need to assess your financial well-being periodically so that you can ensure that you are on the right track and make any adjustments if required. You may also need to adjust your strategies as you approach retirement, such as moving any investments into lower-risk categories. Regular financial audits will also help you to feel in control of your finances and provide peace of mind.
Financial management can be one of the biggest challenges in adulthood, especially in the current economic climate. The above strategies should help you gain control of your finances, improve your current situation, and build toward a brighter financial future. For additional support, consider using tools like albert genius to help you navigate your financial journey. It can be difficult and require making many big and small decisions, but smart financial management can greatly improve every aspect of your lifestyle and is always worth the effort.
