Tag: budget

habits-of-debt-free-people

14 Habits of Debt Free People – Simple Guide!

Today I will be discussing 14 habits of debt free people and how they can adopt

Have you ever considered being debt free to be a habit? It’s probably not something we would consider often. We think of habits as things like eating healthy and exercising, something that is a regular practice. But being debt free definitely falls into this category.

You see, spending money is a habit, accumulating debt is a habit and therefore breaking this habit requires the creation of another habit – one that is the habit of being debt free.

t is a conscious choice, an effort and a decision that is made, to be debt free, and there are habits that those who are debt free have. Things that help them remain within their free of debt status, and it’s not as simple as creating a budget.

If you’re on the path to becoming debt free, then it’s a good idea to start creating some of these habits for yourself. Don’t stress about trying to add them all in at once – that’s the thing with habits, they take time to create (and that’s okay).

Perhaps you already do some of these things? Or maybe you’re looking for new habits to add in.

Either way, here are 14 habits of debt free people that you can adopt into your life too.

 

 

14 Habits of Debt Free People 

They stick to a budget

Budgeting. Such a dirty word for so many people, but it doesn’t have to be. Having a budget is the best way to make sure you never end up in debt again.

When you have a detailed budget, you know exactly where your money goes and when it needs to go there! This means that there are no surprises and a much smaller chance that you’ll have to use an emergency credit card.

People who are debt free love a good budget because chances are that is exactly how they got out of debt in the first place!

Related post:

Would you like to know how to create a budget, but don’t know where to start? Then see the post below:

 

 

They save save save

This might sound strange but it’s so important to save. If you truly want debt-free living then saving must become normal to you.

For the longest time, we didn’t save any money, partly because we felt that we weren’t in a financial position to be able to do so but also because we just weren’t used to it.

Saving actually felt like a punishment.

In order to save money, you have to have a positive attitude towards it.

habits-of-debt-free-people

You must habitually, purposefully do it otherwise you won’t do it at all. Believe me, I’ve been there.

In the past, the only time I have successfully managed to save was when there was something that I really wanted and my goal was to reach it.

Like the time we needed a bigger house or the time we needed a second car.

Set yourself saving goals, long term ones as well as short term goals. This will make it so much easier for you to save up your money.

 

 

They track their spending

Debt-free people always track their spending and are always aware of their money routes. If you will not track your spending, your budgeting will not be as efficient as it should be. Before budgeting for your next month, when you track your last month’s spending, it becomes easy to create a budget and make any changes you need for your next month.

You might agree with me that every purchase we make seems to be very important to us. We are living in a materialistic culture, where much of the attention is given to owning things, even if we don’t need it. I think you will agree with me on this one that If you want to be debt-free, you have to track your spending and figure out the unnecessary purchases.

It will be easy to figure out your budget when you know, exactly where your money is coming and where it is going. There are a lot of apps to track your expenses but you can do it old school way also. Take your pen and paper, and start writing down your expenses. This is the best habit you can develop to stay debt-free.

Related post:

Would you like advice on cutting down your monthly expenses, but don’t know where to start? Then see the post below:

 

 

They live below your means

Living below your means basically means that you spend less than what you earn. It may sound obvious and simple, but the reality is that many people spend all of their income each month.

It is easily done, especially if you do not have a budget in place or do not look at your bank statements.

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If you look at many successful people, you can see that they live below their means. What this means is that they do not spend all of their pay-cheque each month – they save a lot of it instead.

If you want to get out of debt and stay out of debt, living below your means will be the key to doing so. You aren’t going to get anywhere fast if you waste all of your money each month!

 

 

They have a financial goals

Having financial goals is great because it keeps you motivated to work towards something you actually want to achieve.

Financial goals are very subjective and not one size fits all. One person’s financial goal might be to become a millionaire by 50, and another person’s goal might be to get out of debt by 30. It all depends on you and your specific circumstances.

Once you know what your goals are related to your finances, you can start coming up with a plan.

If you are someone who has a lot of debt and wants to pay it off before you turn 30, look at how much you owe. Then, calculate how much you would have to pay every month until you reach 30 to pay it all off.

Sometimes, you may find that you can’t reach those goals in the exact time-frame you set out for yourself. And that’s ok. In that case, set smaller goals which will ultimately get you to your bigger goals and to where you want to be with your finances.

Related post:

Would you like to know how to set SMART financial goals, but don’t know where to start? Then see the post below:

 

 

They have an emergency fund

Take some of the stress out of life by building up a solid emergency fund for rainy days.

It’s not a case of if you’ll need that money someday, it’s when.

Boilers break, cars need repairing, jobs don’t work out and unexpected bills can land on your doorstep at any moment. If you’re not financially prepared for these situations, then you can end up resorting to credit cards or loans to help you out. That’s how you end up in serious debt, and it makes an already stressful situation much, much worse.

Work on building up a rainy-day fund that’s enough to cover 3-6 months (or more if you can!) worth of bills and living expenses should you not be able to work for any reason.

Related post:

Would you like to know how to create a emergency fund, but don’t know where to start? Then see the post below:

 

 

They pay their bills on time

I cannot stress the importance of making sure you pay your bills on time. I know there are situations that occur that are sometimes out of our control but being financially savvy and creating good money habits is about avoiding debt and financial trouble.

There are legitimate reasons why you may not be able to pay your bills on time but there are also reasons that just boil down to not making the correct money decisions.

Your bills should come before anything else. That’s why I always recommend paying your bills as soon as you’ve been paid. That way all the important stuff is out of the way and you don’t have to worry about keeping your money back to pay off your bills.

Aligning all your bill payment dates is another really handy tip to ensure that your bills are all getting paid on time. Make sure all your bills have the same payment date or are very close together rather than being spread out across the month.

 

They know the difference between want and need

Another important habit to have is the ability to know the difference between a want and a need. Making a poor purchase on a want will give you temporary satisfaction, while buying something that you need will be enjoyed long after and won’t be a straining burden on your finances.

When you’re weighing a purchase, you need to take a look at whether it will add more value to your life, or if it will be a setback in your long-term goals.

That’s not to say that you should never buy something that brings pleasure, but you should always consider what value it adds to your life.

Related post:

Would you like to know how to complete a no spend month to save money? Then see the post below:

 

 

Put side hustle money to one side

With our living expenses right down, we were living just under half of the money that we made from our main jobs.  This meant that the difference and any side hustle income was for saving/investing.

I made the decision that any side hustle money was to be put in a separate pot.  I’m not what motivated me to do this in the first place but it worked wonders.

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Seeing my side hustle income grow independently made me realise how hard I have been working to achieve it.  It also inspired me to make more.

When the figure didn’t grow much over one month, it would give me a kick up the bottom to find more ways of producing income.

Related posts:

Interested in earning some extra cash through a side hustle? Then see the posts below:

 

 

They have a positive money mindset

A money mindset is the attitude you have towards your financial situation.

If you have a negative mindset and continuously think this is the best you can do and it won’t get any better, then that’s where you’re going to be stuck.

If you always focus on what’s wrong, it’ll be impossible to stay motivated. By changing to a positive money mindset, you’ll start making better choices about your finances.

People who are never broke know that money always comes back to them. Just keep thinking to yourself or saying there’s more where that came from.

Related post:

Would like to learn more about how implementing a money mindset can help you achieve financial freedom and live a happier life? Then the post below:

 

 

They surround themselves with like-minded people

Motivational speaker Jim Rohn once said, “You are the average of the five people you spend most of your time with”. We are greatly influenced by relationships and those who are closest to us. These relationships can impact our life in general and our financial life too.

We all have to make tough decisions at some point, especially if you are trying to get out and stay out of debt. That’s why it’s so important to surround yourself with positive and supportive people who will cheer you on as you make progress towards achieving your financial goals.

 

They value experience over things

One of the habits of debt free people is that they don’t focus on material things. They understand that stuff can never be a replacement for meaningful relationships with their family and friends.

People who are determined to get out of debt know that experiences make them happier than things, so they stay focused on reaching their goals.

 

They pay attention to detail

Debt-free people know that tracking their spending is the first step in getting control of their finances. This allows them to see if there are any money leaks in their spending so they can eliminate unnecessary expenses.

They also notice if an incorrect charge appears on their bill and are less likely to miss a payment due date.

 

They do their homework

One of the habits of debt free people is that they understand the importance of doing their research. They understand the basic concepts of personal finance so they can gain control of their money and make informed decisions. They don’t let others make important decisions for them.

They think long-term when making any big purchase and they are not afraid to be pro-active or negotiate to get a better deal. They actively seek out opportunities to save money and increase their income on an ongoing basis.

 

14 habits of debt free people – Final thought

If you want to become debt free (and stay debt free), then adopt these 14 habits of debt free people. The best part? You don’t have to wait until you are debt free to do these things.

Start following these 14 habits of debt free people and they will become YOUR habits as well!

What habits do you need to work on to help you become debt free?  And which ones are you already rocking?  Comment below because I’d love to know!

If you found this post useful, you might want to save THIS PIN below to your Pinterest Finance board for later!

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how-to-use-the-cash-envelope-system

How To Use the Cash Envelope System – Simple Guide

Today I will discussing how to use the cash envelope system, another tip by financial guru Dave Ramsey.

The cash envelope system can be a game changer for anyone struggling with money.

It is the best way to only spend what you can actually afford. In cash!

For many people, they can’t imagine ever spending money any other way than using the cash envelope system.

While it is a game changer, you must learn how to use the cash envelope system correctly. If not, you are in the same game as before. It won’t be able to work properly and you won’t see the greatest benefits of using cash.

Moving over to a cash envelope system is the simplest tool to start budgeting. Over time, it will help you to stop living payday to payday and start saving more money.

The cash envelope system is a great way to jump into budgeting for the first time. You get to see how and where you are physically spending your money. Online transactions are harder to track and more difficult to feel the pain of spending money.

Let’s learn how to start using the cash envelope system properly.

 

 

How to use the cash envelope system

What is the cash envelope system?

The cash envelope system is a way to visualise and maintain your budget. In your budget, you will have categories of spending. Some or all of those categories will have an envelope.

Whether you decide to move to a complete cash system or a mixture of cash and digital is up to you.

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Inside the envelope, you will place the cash you need (that you have previously budgeted) for each category.

During the month you will use those envelopes of cash to pay for items from each category.

The idea is to use the cash to help you stay on budget in each category and not to overspend. Allowing you to free up money to save more or even pay down debt!

 

How does the cash envelope system work?

Before you develop an opinion on cash envelopes, it’s important to know exactly how cash envelopes work!

Basically, instead of using your debit card for certain purchases, you choose to use cash instead.

This means that you have to intentionally decide how much money you want to spend in certain categories of your budget.

Then, head to the bank and withdraw cash from your checking account for those categories.

Seems like too much work? I promise it’s not! Plus, cash envelopes help people develop positive habits such as living within their means!

It’s a great way to help you stick to your budget and not swipe the debit card too many times!

 

How the cash envelope method can help you control your spending

Studies have shown that most people spend less when they use cash. The physical act of putting the dollars/pounds in someone’s hand and seeing them go is more painful than swiping a card, and the physical ability to see when the cash is gone and you have no money to spend will prevent you from overspending.

Swiping plastic can be so easy and can lead to massive overspending! Cash envelopes force you to think twice before spending.

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If you run out of money in your cash envelope, you cannot spend any more money.

This method won’t work if you just pull out your card when the cash in your envelope is gone. You must practice discipline so that if the cash is gone, you do not spend.

Related post:

Interested in learning how to organise your finances, but don’t know where to start? See our post below:

 

 

Create a budget

The cash envelope system won’t work if you don’t have a budget created. To be successful with cash envelopes, you have a lot of work that needs to be done before you begin the process of switching from debit to cash for your budget.

If you haven’t already, you need to create a successful budget. That’s the first step. I’m not going to lie, the hard part of the cash envelope system is not using the system itself, but developing and perfecting a budget that allows you to use envelopes in the first place.

Related post:

Interested in learning how to create a budget? but don’t know where to start? See our post below:

 

 

Withdrawing your cash and set it aside

After every payday, you can get your money and put your budgeted amount of cash inside each of the envelopes. It is important that you do this right away so that you don’t forget and use the money for something else.

The sooner you can set aside your budget, the better. If you get paid once a month, you will be getting all of the money and putting it in the designated cash envelopes.

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If you are paid twice a month, you will divide your total amount needed per month by two and this will be the amount you will withdraw or get from your payday every time.

 

Cash envelope categories ideas

I don’t recommend pulling cash out to pay your rent or electricity bill. Those are both expenses where you aren’t likely to overspend each month.

Instead, pull cash out for areas in your budget where you tend to spend too much money.

Not sure where you are spending too much money? That’s okay! I recommend printing off your bank statements from last month. Go through each transaction and categorize it.

Highlight all the transactions where you went out to eat in one colour. Then use a different colour highlighter for all the times you ran to the grocery store.

Once you’ve categorised your transactions, add up how much you’re spending in each area. If you’re spending more than you had budgeted, then chances are you need a cash envelope for that category!

Below are common cash envelope categories:

  • Food: Groceries
  • Food: Eating out
  • Haircuts
  • Fun Money
  • Entertainment
  • Clothing
  • Car Maintenance
  • Home Repairs
  • Christmas

Ultimately, find what works for you when it comes to using cash envelopes.

 

Track your expenses

The beauty of this cash-only system is that it helps you eliminate overspending. When the money is gone, it’s gone.

With that being said, that doesn’t mean there isn’t room for improvement in your budget. When you look back over your month and wonder, where did my money go? You can look back and see exactly where your money went!

Related post:

Interested in cutting down your expenses, but don’t know where to start? See our post below:

 

 

Stick to a budget

If you run out of cash in any one category and your envelope is empty, that means you can’t spend any more money from that envelope.

When first starting out you can borrow from other envelopes, but be aware that this is a signal that you may need to adjust your budget or your spending.

Be sure to record any money you took out of another envelope and record the new amounts.

But you want to avoid having to borrow from any other envelopes too often and adjust your budget and spending as needed during your next budget review.

 

Allocate leftover cash

If you have cash left over at the end of the week or month then you are doing great!

Any leftover cash should be allocated towards debt first and then towards savings. If you haven’t already built up an emergency fund then put any extra cash towards your first $/£1000 emergency fund then start tackling your debt.

If you find you always have extra in certain categories, then reallocate that money to any categories you may be going over in, or start directing it at paying off your debt, or building your savings and reduce that category amount for the future

Related posts:

Interested in learning more about creating an emergency fund? Then see our post below:

Interested in learning about the different methods of paying off debt or advice in paying it off? Then see our posts below:

 

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Do I Have to use cash for everything?

No, you don’t have to use cash for everything. Overall, there’s not a huge benefit to paying your monthly bills with cash. Paying large payments with cash can become cumbersome and I really don’t see a bonus to doing it this way.

I’ll cover this in further detail in a bit. But my personal choice for paying monthly bills is to use online bill pay and use the cash envelope system for day-to-day purchases.

 

Why cash envelopes work so well

This system works so well because it’s simple and tangible. When you’re purchasing everything with credit it becomes so easy to swipe your card without even thinking about the money you’re spending.

When using cash only you are physically dealing with the money which somehow changes your money mindset.

 

Pros of cash envelopes

  • Fewer transactions to reconcile when you balance your budget (for example – one cash withdrawal instead of 20 little fast-food purchases)
  • Easily see you have no more money to spend
  • Forces you to be organised
  • Deters impulsive overspending from online and card purchases
  • Total awareness of your budget and spending

 

Cons of cash envelopes

  • You can lose cash
  • Can be impractical if you do a lot of online shopping
  • Requires organisation to get cash out in a timely manner
  • Requires you to go to bank and withdraw cash every time you get paid

 

How to use the cash envelope system – Final thought

The cash envelope system is designed to teach you discipline in your spending and to help you overcome your habit of overspending.

It may be hard at first to carry around all that cash and not use your debit card anymore, you may even get some funny looks for whipping out an envelope with cash. But who cares?

This is for you and only you, a way to help you control your finances and be more intentional with your spending.

Have you tried the cash envelope system? Did it work for you?

If you found this post useful, you might want to save THIS PIN below to your Pinterest Finance board for later!

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dave-ramsey's-7-baby-steps

Dave Ramsey’s 7 Baby Steps – Path to Financial Freedom!

Finances are a struggle. They’re the epitome of adulting and not everyone has them figured out. It takes a lot of effort and self-discipline to get things together, so I’m going to walk you through a popular financial strategy known as Dave Ramsey’s 7 Baby Steps that will hopefully make things easier.

You probably already know that personal finance is an ever-growing topic because it has an effect on everyone. Every individual is exposed to money in some capacity and it is important to understand how it works.

 

 

Who is Dave Ramsey?

Dave Ramsey is one of the world’s foremost experts on personal finances and has been instrumental in helping people take back control of their finances. He hosts the popular podcast The Dave Ramsey Show and his book, The Total Money Makeover, is a must-read.

 

More about Dave Ramsey

The former realtor lost everything and filed for bankruptcy in his early years.

Somehow, he managed to get out of debt and began another path of helping others take the same quest.

dave-ramsey's-7-baby-steps

Known for his Christian background and no-nonsense approach to personal finance, Ramsey gradually rose to become one of the most trusted and sought-after financial advisers in the United States.

He has a huge fan base of followers. With an estimated net worth of $55 million, Ramsey is a living proof that you, too, can turn a bad financial situation around.

 

Dave Ramsey’s 7 Baby Steps – Path to Financial Freedom!

So, what’s so special about the 7 steps? Nothing really. It’s simply age-old, practical components of financial management and wealth building.

Though most people think of it as an all-encompassing approach to finances, it should only be considered as a minimum of what you should do.

As many critics of Dave Ramsey note, there are some components and considerations that are missing. I’ll discuss those at each step.

So here is breakdown of Dave Ramsey’s 7 baby steps. I strongly believe they will help you with your finances when correctly implemented:

 

Step 1: Save $/£1,000 to start your emergency fund

This is the most significant thing you can do for yourself financially. You never know when you will have to deal with a situation that requires a large amount of money. Maybe your alternator goes out or it rains and you find out your roof is leaking and needs to be patched. Having an emergency fund will let you cover these expenses without getting in debt or dipping into your savings (if you have any).

Where to Keep Your Emergency Fund?

Putting this cash in an online savings account is a great choice since it will give you a good interest rate and you’ll have easy access to it if ever needed.

I recommend using an online savings account so the money isn’t easily accessible. Yes, you can get to it but you can’t just go down to the ATM and pull funds out. At a minimum, you may want to consider having the savings account at a different bank than your main bank. That way there is at least a small barrier so you don’t just transfer money over to your checking because the balance is getting low.

Your contingency plan does not necessarily have to be of $/£1000. It’s ok if you consider, especially in today’s economy, that you can need a larger fund to have a better sense of protection. If your expenses are really low, a $/£500 emergency fund might make more sense. The ultimate goal with this step is to not have to incur debt to handle an unforeseen event.

Related posts:

Interested in learning more about creating an emergency fund? Then see our post below:

 

 

Step 2: Pay all your debts except for the mortgage

After you save $/£1,000 emergency fund, Baby Step 2 is paying off all your debt. This step does not include your mortgage. Use the debt snowball method for the best results. It is the most effective strategy to achieve Baby Step two.

There are many ways to pay off your debt. Some people try to tackle all their debt at the same time. They pay a little bit extra every month on everything, even the house, but gain no traction. Other people focus on targeting the highest interest rate debt first. However, in my opinion, the best way to get out of debt ASAP is the debt snowball.

dave-ramsey's-7-baby-steps

To get the ball rolling, make a list of all your debts, from the smallest balance to the largest. Continue making minimum payments on all your debts. Then, focus on eliminating them one at a time, starting with the smallest one.

Once you have eliminated the first debt on the list, move on to the second one. You must focus on reducing one debt at a time as you continue making minimum payments on everything else.

Related posts:

Interested in learning about the different methods of paying off debt or advice in paying it off? Then see our posts below:

 

 

Step 3: Save 3-6 month’s worth of expenses

This will be your larger emergency fund, or cushion if you or your spouse happen to lose a job or have unexpected medical bills.

It is meant to be your fallout for large unexpected life events. A job loss, a death in the family, an injury preventing you from working can cause some serious hardship if you aren’t prepared.

What may seem like a tsunami to some, may feel like a small rainfall to someone with a beefed-up savings.

Some jobs are easier to replace than others. If you work in a field where job security may be scarce, then you should save more money. Some experts even suggest saving up to 9 month’s worth of expenses.

Related post:

Interested in cutting down your expenses, but don’t know where to start? See our post below:

 

 

Step 4: Invest 15% into retirement

You want to retire comfortably right? Do you really want to work when you’re retired?

Dave suggests saving 15% of your income for retirement. A lot of people think that this amount is huge, do me a favour, add up all of your debt. How much percentage of your income goes to your debt?

dave-ramsey's-7-baby-steps

Probably more than 15%, right? If you get paid $2,000 monthly and have a car payment of $195, that’s 10% already. Then you probably have your loans and some credit card debt, am I right?

All that money you were putting towards debt can now go into retirement.

 

Step 5: Fund college for your children (university for my UK people)

Depending on the age of your children you may simply be saving for your children’s college education or you may be assisting in paying for college.

No matter the age of your children again this is a personal choice step.  You may choose to help with college education or you may choose to assist your child in applying for scholarships.

How you choose to follow through with this step is again your choice and based on your finances.

 

Step 6: Pay off your home

Mortgage debt works differently from other types of consumer debt, making it easier to put aside until after you’ve got other healthier financial habits in place. You’ll still be continuing Baby Steps 4 and 5 in this step, but now you can focus on getting rid of this last hurdle.

If you’re still paying off your mortgage, now is the time to get rid of it. As you did with your debt in Baby Step 2, you’ll put all of your extra money towards paying down the mortgage on your home.

This allows you to own your own home outright so that you don’t have to worry about mortgage payments as you head into retirement.

 

Step 7: Build wealth and give

The last step is to create a legacy by giving back with your money. That can look like helping out friends and family or donating to charitable causes that are meaningful and important to you.

You can also focus on building wealth to live a more comfortable life in retirement, to create an inheritance for your kids, or to create a foundation to continue your legacy after you’re gone.

It’s your call on how to use your money now that it’s not obligated to debts.

 

Dave Ramsey’s 7 Baby Steps – Final thought

Believe it or not, a lot of people have followed these Dave Ramsey’s Baby Steps and walked away with financial independence. I know that’s something you’d like to have.

The reality is:

It’s not that difficult to follow these steps. Sure, you’ll get stumbled on some of these. But that’s the part of going through these steps.

If these steps are so easy, then, a lot of people would be doing them and a lot of them would be successful by now.

The fact remains:

Those who tried and followed these steps could see big, better financial changes in their lives.

Have you done any of Dave Ramsey’s baby steps? If not, are you willing to try them to improve your financial situation?

If you found this post useful, you might want to save THIS PIN below to your Pinterest Finance board for later!

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10-smart-Money-Habits

10 Smart Money Habits – Simple Guide of 10 Tips

Are you adopting smart money habits so you can grow healthy, wealthy and wise?

When it comes to your finances, the patterns you create with your money can make or break you.

I developed some terrible money habits in my 20s. They lead me into a downward spiral of credit card debt and unpaid bills.

It wasn’t pretty. But I was able to sort things out and get my finances on track by adopting some better money habits instead.

And now the credit card bills are long gone. They’ve been replaced by savings, investments and sweet, sweet financial security.

Sounds good, right?

I want you to get on the path to financial freedom, too. That’s what we’re all about here.

So, dive into this post to learn the top good money habits you should be following that can put you on the path to a richer life!

Here are my 10 smart money habits.

 

 

10 Smart Money Habits

Educate yourself about personal finance

I will never understand why personal finance isn’t taught in schools. At least the very basics should be covered. Unfortunately, it’s not so it’s down to you to make sure you educate yourself properly.

Everything I know about finance has come from doing my own research and learning along the way. When you leave school, you’re more than likely going to get your first job. That’s a bunch of 16-year olds earning money for the first time when they don’t have the first clue about wages.

It’s crazy. If there’s something you don’t understand when it comes to money just ask or research it. Don’t turn a blind eye when it comes to money matters. The more knowledge you have, the better.

You need a good solid knowledge of what’s on your wage slip so tax (and your tax code), National Insurance contributions, pension deductions, student loan deductions and any medical schemes run through your company that are deducted from your wage.

You also need to know about rent/mortgages, bank accounts and credit scores. So, take some time to make sure you’re properly clued up.

 

Create a budget

This might sound boring and you may have heard it all before, but don’t think of it as being a restrictive budget. Instead, this budget is designed to help you understand how much you can save and invest for your future.

This is one of the simplest and most effective financial planning tools. By using a budget, you will create an awareness of where you are spending your money and this will give you control over your hard-earned cash.

10-smart-Money-Habits

By creating a budget, you can set an intention for your money and by setting estimated spending limits, you can learn to judge what is a responsible amount to spend (e.g., Holidays). This is a much better money habit to have because you can set guilt-free spending amounts.

Related post:

Would you like to know how to create a budget, but don’t know where to start? Then see the post below:

 

 

Track your expenses

Having a budget set up is great but in order to stay on track with your budget, you need to track your expenses. You need to keep a record of all the money you are spending each month.

I love using a budget app because it allows me to add up all my expenses throughout the day. If you choose to use a printable budget template, you will need to keep all your receipts so you can write down what you are spending every day.

It is extremely important to keep up with your expenses daily. Little purchases throughout the day can add up and push you over your budget

Related post:

Would you like advice on cutting down your monthly expenses, but don’t know where to start? Then see the post below:

 

 

Set financial goals

Having financial goals is great because it keeps you motivated to work towards something you actually want to achieve.

Financial goals are very subjective and not one size fits all. One person’s financial goal might be to become a millionaire by 50, and another person’s goal might be to get out of debt by 30. It all depends on you and your specific circumstances.

Once you know what your goals are related to your finances, you can start coming up with a plan.

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If you are someone who has a lot of debt and wants to pay it off before you turn 30, look at how much you owe. Then, calculate how much you would have to pay every month until you reach 30 to pay it all off.

Sometimes, you may find that you can’t reach those goals in the exact time-frame you set out for yourself. And that’s ok. In that case, set smaller goals which will ultimately get you to your bigger goals and to where you want to be with your finances.

Related post:

Would you like to know how to set SMART financial goals, but don’t know where to start? Then see the post below:

 

 

Don’t overspend

We find it hard to keep or set a limit on how much we are spending. It reveals we are not living within our means.

Have you ever spent-spent-spent then when you checked you bank account you felt deflated? Buyer’s remorse hits you and you promise yourself not to find yourself in the same situation, even return some items.

Or have you walked into the supermarket to pick up just one item and left with a tonne of items you had not planned buying? Yep, I know that all too well.

Our spending habits make or break our bank balance, as an overspender, you have no way of tracking your expenses not even a budget in place. You’ll stop spending when you bank balance hits zero.

Without tracking our expenses, our bank balance gets depleted until it is 0 or in the red and we repeat this cycle month after month.

Related post:

Would you like to know how to complete a no spend month to save money? Then see the post below:

 

 

Start saving

You knew this was coming, didn’t you? Saving money towards your future should definitely be at the top of your financial priorities.

Sometimes though, it can be easier said than done, especially when you are not making a lot of money and are drowning in debt.

In times like these, it is still good to save, even if you are just saving $50/£50 a month. When you get into the habit of saving, it becomes easier for you to put money away later on in life too, no matter what your salary is.

If you find that saving even $50/£50 is a challenge for you, it might be a good idea to find some work from home jobs you can do to create an extra form of income. Online jobs are becoming increasingly more popular because there are a lot to choose from, depending on what your interests are and how much free time you have.

 

 

Plan for retirement

Retirement is probably the last thing on your mind right now but you need to start planning. From the moment I got my first proper job after school, I starting paying into the company pension.

10-smart-Money-Habits

When I started my first job, I noticed there weren’t any pension deductions on my wage so I questioned why and was told new employees usually didn’t start paying into a pension until they’d been there 6 months. I asked to start paying into one from the next wage. That’s why it’s important to know what’s going on with your wage and understand the importance on paying into a pension as soon as you can.

If possible, it doesn’t hurt to set aside your own retirement savings pot either because we all know that when retirement comes that your pension won’t actually be that big. Now is the perfect time to think about the future and have plans in place.

 

Pay your bills on time

I cannot stress the importance of making sure you pay your bills on time. I know there are situations that occur that are sometimes out of our control but being financially savvy and creating good money habits is about avoiding debt and financial trouble.

There are legitimate reasons why you may not be able to pay your bills on time but there are also reasons that just boil down to not making the correct money decisions.

Your bills should come before anything else. That’s why I always recommend paying your bills as soon as you’ve been paid. That way all the important stuff is out of the way and you don’t have to worry about keeping your money back to pay off your bills.

Aligning all your bill payment dates is another really handy tip to ensure that your bills are all getting paid on time. Make sure all your bills have the same payment date or are very close together rather than being spread out across the month.

 

Say no!

I might sound like a bit of a weirdo when I say that you should be saying no to yourself on a very regular basis.

Saying no keeps you grounded.

It stops you building an entitlement mentality, one where you convince yourself you should buy something because you deserve it.

I can’t tell you the number of times I have had a silent conversation with myself about popping out to the shops or go online to treat myself.

I already had my lunch, snacks and drinks so I needed nothing. But I wanted something.

Saying no meant that I kept to my no spending at work plan and stopped the slide back into bad old habits creeping in and destroying my budget.

Related post:

Would like to learn more about how implementing a money mindset can help you achieve financial freedom and live a happier life? Then the post below:

 

 

Put side hustle money to one side

With our living expenses right down, we were living just under half of the money that we made from our main jobs.  This meant that the difference and any side hustle income was for saving/investing.

I made the decision that any side hustle money was to be put in a separate pot.  I’m not what motivated me to do this in the first place but it worked wonders.

Seeing my side hustle income grow independently made me realise how hard I hard been working to achieve it.  It also inspired me to make more.

When the figure didn’t grow much over one month, it would give me a kick up the bottom to find more ways of producing income.

Related posts:

Interested in earning some extra cash through a side hustle? Then see the posts below:

 

 

10 Smart Money Habits – Final thought

We are all creatures of habit, and sometimes this can be a very bad thing. If you’ve struggled in the past with finances, I challenge you to use these principles, and in very little time you’ll be surprised how your circumstances will begin to change.

What are some other habits that can provide people with financial freedom that you know about? I would love to hear them below.

If you found this post useful, you might want to save THIS PIN below to your Pinterest Finance board for later!

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10-Good-Money-Habits-of-People-Who-Are-Never-Broke

10 Good Money Habits of People Who Are Never Broke – Simple Guide

Today I will be discussing 10 good money habits of people who are never broke.

A common New Year’s resolution for many adults surrounds money.  Maybe you want to get out of debt, save for a big trip, or grow your savings more than ever before.

All of these resolutions are great and I wish you the best of luck accomplishing them.  But today I want to discuss more than just reaching a certain amount of money as a goal.  I want to talk about good money habits of people who are never broke.

Not too long ago, I struggled pretty bad financially.

Every single week, I ran out of money days before payday. I lived payday to payday for years.

I didn’t have very good money habits and it caused A LOT of problems.

In all those years, I never stopped working towards a way to make a full-time living from home.

It’s exhausting always worrying and stressing about money and bills. I had to completely change everything I thought I knew about money and develop new money habits.

Money habits are developed by age 7, and it can be really hard to reverse those habits as we get older. But it’s possible.

 

 

10 Good Money Habits of People Who Are Never Broke

By changing your everyday money habits, it’ll have a positive effect on your overall financial situation so you’re not always broke.

Below are 10 habits you should look to implement to improve your finances.

 

They create a budget

This might sound boring and you may have heard it all before, but don’t think of it as being a restrictive budget. Instead, this budget is designed to help you understand how much you can save and invest for your future.

This is one of the simplest and most effective financial planning tools. By using a budget, you will create an awareness of where you are spending your money and this will give you control over your hard-earned cash.

By creating a budget, you can set an intention for your money and by setting estimated spending limits, you can learn to judge what is a responsible amount to spend (e.g., Holidays). This is a much better money habit to have because you can set guilt-free spending amounts.

Related post:

Would you like to know how to create a budget, but don’t know where to start? Then see the post below:

 

 

They have financial goals

Not setting financial goals was definitely one of my biggest mistakes.

You see, I was working for years and yet I didn’t have any savings and emergency fund.

And it wasn’t because I was not earning enough money, it was because I never really had to motivation to start it.

And you know why? It’s because I didn’t have any financial goals.

A goal requires you to take action.

Creating specific financial goals will not only help you determine the actions that you need to take to achieve that goal but it also gives you the motivation to work towards it.

Related posts:

Would you like to know how to set SMART financial goals, but don’t know where to start? Then see the post below:

 

 

They clear their debts

If you really want to stabilise your life financially or otherwise, you must do all you can to stay out of debt. If you are in deficit, maybe due to a loan or credit card debt, then clearing it is the first goal you should strive to achieve.

There is no way you can possibly make headway if you are in debt! Paying off your debts would make your life a lot easier.

How to go about it?

First, don’t pay off your debt one-time. Splitting the payment in chunks will make it simple and feasible.

Let’s say you are in debt of £3000; splitting the payment into £500 per month will be a lot easier, especially if you don’t earn much more than £1,000 per month. In just six months, you would have cleared the debt.

Related posts:

Would you like to learn more about advice on how to pay off debt, but don’t know where to start? Then see the post below:

 

 

They have an emergency fund

Take some of the stress out of life by building up a solid emergency fund for rainy days.

It’s not a case of if you’ll need that money someday, it’s when.

10-Good-Money-Habits-of-People-Who-Are-Never-Broke

Boilers break, cars need repairing, jobs don’t work out and unexpected bills can land on your doorstep at any moment. If you’re not financially prepared for these situations, then you can end up resorting to credit cards or loans to help you out. That’s how you end up in serious debt, and it makes an already stressful situation much, much worse.

Work on building up a rainy-day fund that’s enough to cover 3-6 months (or more if you can!) worth of bills and living expenses should you not be able to work for any reason.

Related post:

Would you like to know how to create a emergency fund, but don’t know where to start? Then see the post below:

 

 

They save, save, save

Save as much as your lifestyle permits. People who never go broke are disciplined about their savings. One of the rules of saving is to save at least 6 months of your current living expenses. It will require you making you making a few lifestyle changes, and it may not be easy, but this is one case where the end indeed justifies the means.

Understand that having more money does not necessarily equate to more savings. So, don’t wait until you start earning more.

10-Good-Money-Habits-of-People-Who-Are-Never-Broke

For instance, instead of eating out, you can pack your lunch and eat out only on special occasions. Of course, there are people who need to save time, as time is their currency, so eating out is a way to save time for them.

The whole point is to put saving above your spending. Set out an amount you want to save weekly, bi-weekly, monthly as the case may be, and spend from whatever is left. Don’t plan to save after your expenses. Always do it the other way round.

 

 

They put away their credit cards

I understand that credit cards are very convenient and yes if you pay off the full balance each month, those interest charges won’t hit you.

However, people with good money habits know that credit cards can become very expensive. It’s always so easy to overspend when you are using them and we should know that spending money that we don’t have is certainly a bad idea. Don’t buy now then worry about how you will pay it off later.

 

They know the difference between want and need

Another important habit to have is the ability to know the difference between a want and a need. Making a poor purchase on a want will give you temporary satisfaction, while buying something that you need will be enjoyed long after and won’t be a straining burden on your finances.

When you’re weighing a purchase, you need to take a look at whether it will add more value to your life, or if it will be a setback in your long-term goals.

That’s not to say that you should never buy something that brings pleasure, but you should always consider what value it adds to your life.

 

They have a positive money mindset

A money mindset is the attitude you have towards your financial situation.

If you have a negative mindset and continuously think this is the best you can do and it won’t get any better, then that’s where you’re going to be stuck.

10-Good-Money-Habits-of-People-Who-Are-Never-Broke

If you always focus on what’s wrong, it’ll be impossible to stay motivated. By changing to a positive money mindset, you’ll start making better choices about your finances.

People who are never broke know that money always comes back to them. Just keep thinking to yourself or saying there’s more where that came from.

Related posts:

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 They take risks

Sometimes, you just have to take risks. I’m not talking about gambling with your life savings or anything too extreme. But the people who only ever play it safe will never know what could have been.

People who are never broke kept trying where others would have quit long before that. They learn from every mistake and failure and take another risk and try again. They try until they finally make it happen.

 

They stay frugal

No matter how much money they get, they limit their spending. They know that in order to maintain their wealth, they cannot increase their spending as their income grows.

They know that they can use the money to make even more money. Every pound/dollar spent on wants is a potential opportunity cost. These people know that and keep their spending low.

Related posts:

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Good money habits of people who are never broke – Final thought

We are all creatures of habit, and sometimes this can be a very bad thing. If you’ve struggled in the past with finances, I challenge you to use these principles, and in very little time you’ll be surprised how your circumstances will begin to change.

What are some other habits that can provide people with financial freedom that you know about? I would love to hear them below.

If you found this post useful, you might want to save THIS PIN below to your Pinterest Finance board for later!

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10 Financial Habits of The Wealthy – Simple Guide to Achieving Financial Freedom

Your financial habits play a huge role in your current financial situation and your future financial stability. There are plenty of people who are making six figures a year and they’re drowning in debt, living payday to payday.

On the flipside, I know people who are making less than half that but, due to good financial habits, are financially stable and have a bright financial future ahead of them.

Over the past few years, I have adopted many good financial habits that have put me on the path to financial freedom. I’m getting close to being debt-free, investing for my future, and saving for my retirement.

I’ve never received an inheritance, annuity, monetary gifts from relatives, etc. And I don’t earn a massive salary. I’m in that position due to dropping bad financial habits and adopting good ones.

Here are 10 financial habits that I recommend you start implementing. Trust me, they will change your life!

 

 

Stick to a budget

Budgeting is the first and foremost step to help you keep your finances in check. Always have a specific amount set aside for the expenses that you need to incur during the month and try to stick to those expenses.

At the end of the month, revisit all your actual expenses and compare it to the budget. This will help you recognise the areas where you might be spending more than you need to and you can then take necessary measures to prevent the same from happening in future.

It’s important to review your budget every now and then to make way for the changes in your financial habits.

Related post:

Would you like to know how to create a budget, but don’t know where to start? Then see the post below:

 

 

Set financial goals 

One of the most important financial habits is simply to set financial goals and spend a little bit of time reviewing them every day.

Write them down and be as specific as possible. For example, if one of your financial goals is to buy a house, what are some of the things you want in a house?

How much does that house cost? Where is it located? Be as specific as you can with each of your financial goals and review them every day.

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Would you like to know how to set SMART financial goals, but don’t know where to start? Then see the post below:

 

 

Pay yourself first

You’ve probably heard this before, but if you’re like me, you might not really know what it means. Basically, this just means that instead of spending your money and saving what’s left, you decide to save money upfront and spend what is left.

How many times do you actually save any money if you save what’s left after spending? Whether you’re saving your emergency fund, for a large purchase, or investing in your retirement account, make sure you’re including it in your budget and moving that money first!

 

Don’t spend more than you earn

This might sound like a “duh” habit, but the facts are that a LOT of us spend more than what we earn. Putting purchases on a credit card and then saying “I’ll pay it off when I get the money” is a perfect example of this.

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Part of the problem is that as a society, we’ve developed a need it now mentality. Instead of saving up for something we want and then paying cash for it, we want instant gratification, so we just swipe our credit card instead.

Avoid doing this and you’re already ten steps ahead.

Related posts:

Would like to learn more about how implementing a money mindset can help you achieve financial freedom and live a happier life? Then the post below:

 

 

Use every method to save

We live in a world where we can’t avoid spending some money, we need to buy things like food and clothes just to survive. That’s why you need to learn some awesome ways that you can save money when buying things, especially online.

save-money

For example, any time I am making an online purchase I use Honey, Quidco or Topcashback.

This is a free service that gives you cash back on stores like Amazon and thousands more that you already shop from. You’ll get a quarterly payment based on money you spent that you can use toward savings or investing.

There are even crazier ways you can try to save money that we can learn from our grandparents and other generations, see the below posts relevant to Frugal Living for those.

 

 

Have multiple income streams

In a study, it was found that 65% of self-made millionaires had 3 or more income streams. Now, this doesn’t mean you have to aim to be a millionaire or that all people who are debt free are millionaires. It means that of those who have a significant amount of money (and one would hope are those who manage their money well), almost two-thirds of them have multiple income streams.

So, what does this mean? Save money, budget

An income stream is a way for you to earn money. For example, when you work your job you get paid a salary and therefore that is one income stream. If you have two jobs, you have two income streams.

save-money

Generally speaking, one income stream doesn’t rely on another and therefore if one income stream is taken out of the mix, then you have other sources of income to keep you going.

Things like investment properties, shares or second jobs are all common income streams.

So, what does this mean for you?

If you want to pay your debt down fast and live a debt-free lifestyle, find different income streams you can add to your overall wealth.

Related posts:

Interested in earning some extra cash through a side hustle? Then see the posts below:

 

 

Don’t impulse shop

Impulse shopping on a regular basis isn’t the best money habit you can have. Not only does it potentially lose you a lot of money, but it also makes you buy a lot of stuff which you probably don’t even need.

I’m not saying that going shopping once in a while is going to completely mess up your finances. However, there is a smart way to shop that is going to be more effective than impulse shopping.

A simple way to shop with a purpose is to have a shopping goal. Before you go out, make a list of the things you need to buy, and stick to that list.

If you feel like you really want something that isn’t on your list, tell yourself that if you still want it the next day, you will come back for it. Chances are, you will not really feel like going back to get it. That will tell you that you didn’t really want that item in the first place.

 

Create an emergency fund

I read somewhere that most in the people in UK don’t even have £300 tucked away for emergencies.

And I’m not going to lie. For a long time, I didn’t have it either. It wasn’t until I actually had an emergency that I realised how important having an emergency fund is.

If you are in the same boat I was in, it is never too late to start. Make saving for an emergency fund a priority, and put as much in it as you can. £300 is a good start and eventually, move up to £1000.

If things ever go wrong, you will be glad you planned for a rainy day.

Related post:

Would you like to know how to create a emergency fund, but don’t know where to start? Then see the post below:

 

 

Automate your finances

You should never have to worry about paying your bills on time because people who manage their money well automate their finances so they don’t even have to think about it.

Create a bills account, ensure there’s enough money in there and have your bills deducted from this account. This means you aren’t mixing your spending money with your bills money and you have money waiting for upcoming expenses.

 

Save up for big purchases

Whether you want to buy a TV, remodel your kitchen, or even put a down payment on a house, it will always be less stressful to save up the cash.

Financing for so many things is surprisingly easy, especially from retail stores. However, not only will you not have that purchase following you for months, but you can often get a better deal if you can pay cash upfront.

This is especially true for things like cars and furniture. And honestly, if you can’t save up and pay cash for something, then you really can’t afford it!

 

10 financial habits of the wealthy – Final thought

Personal finance doesn’t have to be scary; it can be simple if you just take it one step at a time.

Money can’t buy you happiness, but having a well thought out plan for your money and goals for your future will go a long way to helping you be happy.

I hope this list of tips helps you to achieve a better status financially.

If you can think of any other financial habits that can kick-start your journey towards wealth, let me know in the comments below.

If you found this post useful, you might want to save THIS PIN below to your Pinterest Financial board for later!

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How to Create an Emergency Fund – Simple Guide!

One of the best pieces of advice we received before we started our debt free journey was to build an emergency fund.

When I first committed to paying down my debt, I was overwhelmed and didn’t know where to start. It was a lot of debt and it seemed like our budget would never allow for me to make even the smallest dent in it.

But time and time again I read about the importance of having an emergency fund.

And I’m so glad that this was the first step I took.

It seems counter intuitive to save money when you want to pay off debt. But trust me (and countless personal finance experts) when I say it is crucial to your success.

There were several times while I was focused on paying off debt, that I would have been side-tracked if I didn’t have an emergency fund.

For example, there were emergencies including a plumber for a leak, washing machine repair and other costs that add up.

These were all funded from the emergency fund, allowing me to continue to make progress towards paying down my debt.

I never had to take on additional debt to cover these expenses, nor did we come up short at the end of the month because of these expenses.

The emergency fund was a great tool to rely on when paying down debt and staying debt free.

Lets break down how to create an emergency fund!

 

 

What is an emergency fund?

An emergency fund is an easily-accessible pool of money that you keep for life’s emergencies.

Common emergencies that have financial impacts are:

  • Losing a job or needing to quit a job
  • Car repairs
  • Illnesses
  • Unexpected home repairs or home loss
  • Dog visit to the vets

The idea is that you set aside an amount of money so that if an emergency occurs, you have the cash to pay for the emergency.

If you don’t have the money for an emergency you might have to pay for the emergency using debt (like a credit card) or pull money out of retirement savings.

Each emergency can range in cost.

So, if you lose your job and you expect it would take you 6 months to find a job, you may want a fund that would cover 6 months of expenses.

This compares to lower-cost emergencies like repairing your house or car.

Essentially, the fund serves as a buffer so that if an emergency happens, you do not face additional hardship.

 

Why do I need an emergency fund?

Life is unpredictable and unexpected events can catch us by surprise, your car has unexpected repairs needed on your car, the washing machine stops working, or you lose your job!

Without money set aside to cover emergency costs, you could be forced to pay bills with a credit card, loan, or line of credit.

All these options can easily end up costing you more than the initial bill because of high interest payments.

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Choosing high-interest loans can leave you in a hole you can’t get out of! You’ll have to pay them back right away to avoid interest charges and making the required payments may leave you short – resulting in the need to borrow money.

This creates a cycle which can drown a family in debt.

Building an emergency fund for yourself makes it possible to:

  • pay for an unexpected expense without going into debt
  • avoid high-cost loans and cash advances
  • have financial control and peace of mind

Related post:

Want know how to create a budget, but don’t know where to start? Then see the post below:

 

 

How much should I have in my emergency fund?

I think a better question is:

How much helps you sleep better at night?

Everyone has a different answer to this question. Depending on your life circumstances, this answer may vary.

But what do the experts say?

Many financial gurus recommend saving £1,000/$1000 in your emergency fund before tackling your debt, then raising that amount to 3-6 months of expenses after your debt is paid off.

Some say you need as much as 8 months of expenses set aside.

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I think £1,000 is far too little to deal with a real emergency. But I also don’t think you need 6 months of savings sitting there, untouched, until later.

Personally, I recommend having 2-Month of expenses set aside in your Emergency Fund.

This amount serves 2 purposes:

  1. It gives you a few thousand pounds/dollars to deal with larger emergencies (car repairs, house repairs, vet bills)
  2. It gives you the ability to have ALL your money for the next 2 months saved up BEFORE the month begins.

The goal is to be able to absorb the cost of life’s fun little “financial detours”, without affecting your monthly budget, or your goals.

But…

Having 2 months of expenses is hardly enough if something serious occurs. For example: Job loss, or something similar.

I believe you should save 2 months of expenses, and then pay off debt, before building a larger emergency fund.

Once you are debt free, I recommend saving (up to) 12 months of expenses in your Emergency Fund

Again, the exact amount here is a general guideline, but the real answer is what makes YOU feel comfortable.

For some, 3 months is just fine, for others, they NEED 12 months to enjoy life.

Whatever that number is, just make sure it suits you and gives you that peace of mind to fall back on.

Related post:

Want some ideas on how to cut your monthly expenses? Then see the post below:

 

 

Develop emergency fund goal

Once you have identified how much you want to be in your emergency fund, you need to set you goals to achieve.

With specific goals and objectives for your emergency fund, you will be much more excited and motivated to save money and develop an emergency fund.

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They also make sure that you are making progress in terms of creating a fund. For instance, you can create the following goals:

  • Goal 1: Save 1-month living expenses by July.
  • Goal 2: Save 2-month living expenses by September.
  • Goal 3: Save 6-month living expenses by February 2021.

Such goals should be written and kept insight to ensure you are making progress to achieve them.

Typically, people choose to put their different types of goals, including emergency saving goals, on their fridges.

Similarly, many new smart devices applications allow people to write their aims, set reminders, and track progress towards these goals.

Related posts:

Want to learn more and setting SMART financial goals? Then see the post below:

 

 

Open a savings account

I don’t recommend putting your emergency fund in your current account or a savings account linked to your current account.  You want to be able to easily access the money in case of an emergency but not such that you are able to withdraw or transfer money at any time.

I recommend opening an online savings account because:

  • It is free to open a savings account
  • There may be a bonus for opening a new account
  • There are no fees
  • You can transfer money easily
  • It takes 2-3 business days to transfer money into your regular account

If you don’t want to open an online savings account, try another bank or a credit union. Look for:

  • A savings account at a different institution than your checking account.
  • There are no fees
  • No minimum balance required
  • Compare interest rates

From experience, I would not recommend having an emergency fund account tied to your current account.  It is easy to access that money with your debit card.  My emergency fund savings account is at a different bank, plus I declined to have an ATM card.  To withdraw money from this bank, it is too much hassle for me.

 

How to start an emergency fund with no money?

If you are the person who gets to the end of their month with pennies leftover, I hear you!

But the honest truth is you are the type of families who need these accounts the most.

So, let’s talk about ways to save or make money to start supplementing your emergency fund.

Don’t worry, there is more in there than cut out Starbucks– I know you probably have already thought of that on your own!

I promise, there is something in there that can save you money.

If you have mastered being frugal and there isn’t one more penny to cut from your budget, let’s consider making a little money on the side.

Top tip:

Want to earn some extra money straight away with a side-hustle? Then see the posts below:

 

 

How to create an emergency fund – Final thoughts

The unemployment rate has reached an alarming rate. People who have emergency funds will be able to manage things, depending on the size of their emergency fund.

Hence, creating an emergency fund is essential and vital.

An emergency fund should not be taken as an option. In the time of financial distress, one can take the shade of the emergency fund.

In a nutshell, make a clear plan for your emergency savings. It would provide you comfort and solace at one point in time.

Do you have an emergency fund? How much do you have saved? Let me know in the comment section.

If you found this post useful, you might want to save THIS PIN below to your Pinterest Save Money board for later!

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Budget

Budgeting Tips for Beginners – Simple Guide for Creating a Budget!

You may have heard that creating a budget is one of the most important things you can do to get started with managing your money better. And it’s true! But figuring out how to make a budget besides “writing down my expenses and hoping for the best” can seem tricky. Fortunately, you’ll see here that it’s one of the simplest finance steps you can take!

In case this is all new to you, here’s a guide to budgeting tips for beginners.

 

 

But how can I budget when I’m broke?

Even if you make £25,000 a year or £250,000 a year, you must have a budget. A budget is simply a plan for your money. If you don’t make a plan, then your money will leave you.

It doesn’t matter if you make a lot or a little, your money will not work for you, if you don’t tell it where to go.

When you are on a tight budget or a low income, it is especially important to do a budget. You don’t have as much leeway in your spending and a small mistake or emergency could be devastating.

 

What are advantages of creating a budget?

The benefits of budgeting lie in the act of having a plan. A budget it just a plan for your money. That plan takes the stress and anxiety out of managing your finances.

It switches your financial focus from immediate, short-term, and reactive spending to a long-term frame of mind. Quite simply, it changes your perspective.

Just like you wouldn’t build a house without a blueprint, your money habits will be haphazard and reckless without a road map.

If you feel rather clueless as to where your money goes, drafting a plan for it is the exact thing you need!

Having this plan ensures that you have money for the things you need and want. It will help you create a system to stay out of and pay off debt.

 

Why is creating a budget so important?

Essentially, there’s no way you can control where your money is going if you have no idea where it’s going.

By tracking your expenses, you’ll easily be able to see where you may be spending more than you thought you were – and, in turn, where you may have to cut back.

This is especially important if you find yourself spending more than you have each month. You should do everything possible to avoid going into debt but if you keep overspending each month, the problem is just getting worse before it can get better.

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Budgeting is also great for giving you a concrete financial target.

It’s great if you’ve decided you want to save more or pay off your debt more aggressively, but without an actually achievable goal to aspire for, it’s going to be very difficult for you to meet your objectives.

That is, instead of telling yourself “I want to pay off all of my credit card debt”, having a budget allows you to say “I’m going to pay an extra £500 each month on to my credit card” while planning exactly how to do it.

Now let’s get into the details of creating a budget.

Related post:

Want to learn about how you can transform your money mindset? So you can live a happier life financially? See the simple guide below:

 

 

Set financial goals

Not only do you need to know why you want to start budgeting in the first place, but it’s also very important to think in terms of specific numbers.

How much debt are you hoping to pay off each month? How much money do you want to put aside in your emergency fund? How much will you be saving to go toward your retirement?

You cannot budget with the vague idea that you want to “save up some money”. Focus on numbers and focus on facts.

Related post:

Want help setting goals? See the simple guide for setting SMART financial goals:

 

 

Make sure your goals are realistic

My final tip in defining your budgeting goals is to be realistic. Sure, it’d be great to be able to save £200 a month into your traveling fund or to pay off all your debt in the space of 2 years.

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This may not always be possible unless you are willing to switch to an extremely frugal lifestyle. In order to start a budget from scratch, you’ll have to start small. Its small changes done consistently over time that compound into large wins.

Remember, you can always adjust your budget to save more later. Aim to start with realistic goals, and you’ll be well on your way to become a great budgeter!

 

Evaluate Your Expenses

Unfortunately, most budgets fail because they often don’t reflect realistic or actual spending habits. Once you have identified your goals, the next step in formulating a budget is to identify your income and expenses.

Life is busy. Quite often, it’s easy to lose track of small expenses such as a daily coffee or occasionally eating out. Little by little, these expenses add up and can very quickly derail your budget.

A good place to start is to track your everyday expenses. Spend a few weeks tracking what you spend to identify your spending patterns. Make purchases as you normally would on an everyday basis. You’ll start seeing where you can improve almost immediately.

Example:

  • Mortgage: £600
  • Utilities: £150
  • Mobile phone: £40
  • Internet: £30
  • Car payments: £250
  • Car insurance: £80
  • Credit card: £40
  • Netflix and Spotify: £20
  • Groceries: £400
  • Restaurants, bars, & fast food: £200
  • Clothes: £50
  • Miscellaneous (Uber, Starbucks, lotto tickets, convenience store snacks, etc.): £200
  • Monthly expenses total: £2060

You can use a variety of methods for entering in your spending (keep reading to learn more), but the important thing is that you do it especially if you elect for a more hands-on approach to budgeting.

Making all purchases on a single bank card can make tracking easier, or you can opt to keep your receipts or utilise an app.

I personally prefer making most purchases on a single card so that I don’t have to hunt down numbers in multiple different locations.

Plus, when I tried keeping receipts it was too easy to lose one, let them pile up to the point of not entering them, etc.

An app like Mint would definitely come in handy in this regard as it links all of your accounts together for a more seamless approach to budgeting.

Related post:

Want help organising your finances? Then see the simple guide below:

 

 

Subtract the expenses from your income

If you have money left over that means you are spending less money than you make. Great! You are living below your means and have options. You can adjust your budget by putting leftover income towards lowering debt or straight to your savings.

Ideally you need to be saving money for emergencies, big purchases and your future i.e. retirement. Your savings needs to be a financial priority. You may ask why saving money is so important and to answer your question, it’s because by saving money for large purchases (vacations, houses, etc.) it keeps you from having to go into debt with credit cards, loans, or mortgages.

If you have no money left over or are going into the red that means you are spending more money than you make. This is bad, plain and simple. You are living above your means and getting close to financial destruction. In order to fix this, you should adjust your expenses or find a way to increase your income.

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I realise “just make more money” may sound ridiculous but if you are getting yourself into more debt because you are spending unproductively, then you have no choice.

If you are breaking even then you have just enough income to cover your lifestyle and are living within your means. However, you are leaving yourself zero margin for error to cover any emergencies that could occur. As before, your options are to decrease your expenses or increase your income.

Now that you’ve added up your expenses, it’s time to subtract this from your monthly income.

Example: Total income – fixed expenses = variable spending

£2000 – £2060 = -60

Take a look at that total. If yours looks like the example above, you may start to realise your problem.

If your total expenses are more than your monthly income, you’re in the red and need to cut back on your spending.

Spending more than you earn is where many people get into trouble. Let’s fix it!

 

Determine how to cut expenses

Now comes the real work. If you haven’t been able to save as much as you want, your budget needs to cut back on the expenses you logged over these months of tracking.

It is easy to feel overwhelmed, frustrated, or stressed out at this phase of the process. Don’t give up! You can do it! Your bank account, and your life, will thank you for making the sacrifices you need to get ahead.

Sometimes you may find there are areas where you can easily cut back.

Paying £100+ for cable every month just to watch it once a week? Cut the cable bill or consider alternative options if you can’t give it up altogether.

Related post:

Want help cutting back on your expense? Then see the simple guide below:

Want some tips on cutting your electricity bill? Then see the post below:

 

 

How can I stick to a budget?

Sticking to a budget at first can be hard. Just remember that it takes 90 days to install new habits and sticking to the budget will take some time to get used to.

No one is perfect with sticking to the budget, but don’t use that as an excuse to disregard the budget.

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My biggest tips for sticking to the budget is when something comes up that messes up the budget, don’t give up. Just because you made an impulse purchase for £20, don’t throw the budget out the window and go on a shopping spree.

It’s easy to say “well I’ve already screwed up the budget, what does it matter now?”. It does matter, a small mistake is better than several hundred dollars.

Tips:

Top tips:

  • Make visuals of your goals – keep them around for when you are tempted. Put them at your computer, in your wallet, and at work.
  • Make sure you are your spouse are on the same page – make sure everyone is working toward the same goals
  • Have an accountability partner – if you don’t have a spouse or they aren’t on board, tell a trusted friend what you are doing and why and lean on them for support.
  • Get used to the comments – when you are making a lifestyle change, get ready for comments from friends and family about your choices. Not everyone will be supportive of your decisions. When you can’t do something or go out for lunch every day, there will be comments. Don’t let it bother you and explain “it’s not in the budget”.
  • Leave money for fun – you won’t be able to stick to the budget if it’s so tight you can’t do anything fun at all. Now I don’t mean parties and concerts every weekend but budget in some fun money. This will help keep you motivated and stick to it.

 

 

Budgeting tips for beginners – Final thought

Managing money effectively isn’t all about the amount you make but what you do with it. Money is a resource. Proper management of that resource doesn’t involve a magic formula. Not at all, it simply means getting the most from the money you have. This is why learning how to budget is of crucial importance.

A good budget will protect you from going into debt and relying on credit for everyday living expenses. This is not to suggest that credit (e.g. loans) is bad. They have their uses and can accelerate your income to allow for investments in assets.

At its core, a budget should be simple and easy to use, while reflecting current realities, including alignment with future goals.

Do you have any tips to create a budget?

If you found this post useful, you might want to save THIS PIN below to your Pinterest Financial board for later!

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