Why is it that some people find money easy to deal with, regardless of how much they have, whereas for others it is a cause of stress and anxiety? Your relationship with money will be determined by the feelings and thoughts you have from your life experiences. It’s not simply about whether there was enough money in your household as you grew up though. If that were the case, people from poor backgrounds would always be bad with money, and the wealthy would always be good, which simply isn’t true. It is more about whether money was a cause of tension, how money was treated and talked about, and how money was perceived. As small children we learn from our parents by witnessing and absorbing what they do and say, which can shape us, as is the case for many people when it comes to their relationship with money.
The good news is that if you don’t have a good relationship with money – perhaps the thought of opening a credit card statement fills you with dread, or you find discussing money stressful – it is perfectly possible to change. Becoming better with money is not about having more or doing smart things with it. It is about feeling in control of your money, rather than it controlling you.
Here are a few things you can do to help improve your relationship with money and learn to love it, rather than loathe it.
Tip 1: Create your financial filing system
Set aside some time to sort out your financial paperwork and digital documents. Create a financial filing system that works for you so that you know exactly when bills are due for payment, insurances and utility contracts are up for renewal (so that you can shop around for better deals!), how much you have in your pension, savings and how much you owe on credit cards and other debts.
Quite often, it is the fear of the unknown that causes us anxiety, and it is no different when it comes to money. Having a clear picture of your finances may mean having to face up to some home truths, but it is also hugely empowering and the first step towards taking control of your money.
Tip 2: Do a budget
Work out how much money you have coming in each month, and what money you must spend on essentials (such as a mortgage/rent, utilities, food and credit card and loan repayments) and how much is left to spend on other things (your discretionary spending). Ensure you also include occasional spending (those things we know about in advance) such as Christmas, holidays and birthdays and work an amount in to your budget each month to go towards those costs.
Creating a budget will help you understand where your money goes each month and, if you need to make savings or reduce spending, you’ll be able to see where that can be achieved.
Knowledge is power when it comes to our finances and by creating a budget you will have a clearer picture of your finances, be able to make better decisions and exert some control. There are loads of free budgeting tools available on the internet to help you do this.
Tip 3: Create money pots
A good tip to help with budgeting and saving is to create either real or virtual (many bank accounts allow you to set up additional savings accounts) money pots. These are places you can put money each month towards certain costs or events you know you’ll have to pay for in the future. For instance, if you are planning a holiday, work out how much you need to save and put money towards it into a holiday pot each month. You can do the same for things like insurances, school trips and Christmas. It will mean you will gradually build up savings towards those things so that you do not have endure the full cost when the time to pay for them arises.
Money pots work well because they not only remove the money from your “spendable cash” each month, but they also promote a feeling of control and preparedness over your finances, which are huge positives when it comes to improving your relationship with money.
Tip 4: Look to reduce your costs
Where your money goes each month is something you have some control over, so exert that control by reviewing things like Tv subscriptions, utilities, insurances, and your mortgage, if you have one, to see if you can make savings.
By creating your financial filing system (see Tip 1!), you’ll know when things are come up for renewal, so shop around as renewal dates approach as there are frequently savings to be made.
Also, consider whether you still need to subscribe to things if you don’t use them. For example, if you only ever watch Netflix, cancel other TV subscriptions. If you have a gym membership but seldom go, cancel it. An effective way to get an overview of these things is to review all the direct debits that come out of your bank each month, as it’s common for people to find they are still paying for things they have long since forgotten. Also, review your mobile phone tariff to see if you can switch and save money.
Also, when it comes to shopping for food, plan, and consider alternatives. Supermarkets are experts in tempting us to buy things we don’t need, and food brands are experts at making us loyal to them. However, by planning and working out your meals for the week before going to a supermarket, and keeping an open mind to trying different brands, it is possible to slash food bills quite dramatically, as well as reduce food waste!
Whilst saving money by cancelling a TV subscription, switching mobile phone tariff or planning your food shopping might not seem to be huge saving on their own, if you were to put those amounts into a money pot (See Tip 3!), you could have substantial savings by the end of the year.
Working out ways to reduce how much you spend on things, and finding bargains, can be hugely empowering, especially as it also means you will have more money available for other things.
Tip 5: Pay off debt before saving
If you have debt which charges interest, such as on a credit card, a personal loan, or vehicle finance, pay them off before you start saving, as the money you’ll save on interest payments is likely to exceed what you might gain by saving. Debt can feel a little bit like a cloud hanging over us, so look at the repayment of debt as a way of dispelling that cloud. It may take some time and some sacrifices along the way, but when it is repaid things will seem much brighter.
Tip 6: Get help and support
Often when people have a troubled relationship with money, they can feel embarrassed or ashamed about their financial situation and don’t seek help or advice until it is too late.
If you are struggling with your finances, please don’t ignore it. There are charities and organisations who are there to help and you can find their details on the internet. Also, banks and other lenders are now much more supportive of customers who find themselves in financial difficulty, so do not be afraid to contact them to seek help and advice.
As with all relationships, talking about your relationship with money can often provide you with greater clarity and the strength you need to make things better. Speaks with friends and family members about the issues you face as they may be able to help or, at the very least, not having to deal with the problem you face alone can make it seem a little easier to tackle.
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