No-one likes living payday to payday.
When you’re left with £5 to cover all of your expenses at the end of each month after you’ve accidentally over-spent on entertainment and other costs in the weeks before, you can find yourself in a position of serious stress and discomfort. In fact, you might even have to tap into other sources of money to keep you going, meaning that you have more debt to worry about next month.
1. Learn How to Budget
It’s stressful to feel as though you never have enough money to live life the way you would like to. The good news is that there are things you can do to improve your spending habits. Here are just some of the ways that you can stop living from one payday to the next and start enjoying greater financial freedom.
One of the most important things you can do when you’re working on your financial health is learn how to budget appropriately. Although the concept of sorting through your incoming and outgoing expenses each month can seem a little overwhelming at first, anyone can write down and implement a monthly budget with a little bit of focus.
To begin with, get your bank statements from the last three months, and organise your expenses into ingoing and outgoing columns. Add up the amount of money you generally have at the beginning of each month and write that number at the top of the page, then subtract all the expenses you have to commit to, like mortgage bills, rent, car expenses, food, and utility bills.
This should leave you with a list of “luxury” or “additional” expenses that you may be able to cut down on going forward. Decide how much you need to cut back by, and track your expenses from that point onwards, to ensure you stay on track.
2. Set Money into Savings Each Month
Even people with the best intentions can end up living from payday to payday when something goes wrong in their lives, and they need to spend more than they reasonably have. To make sure that you don’t end up in debt, it’s important to work on keeping a small amount of money asideevery month that you can put towards emergency expenses and unexpected costs.
For instance, you can try to put around 10% of your wages away each month in a “rainy day” fund. Remember, your safety blanket fund isn’t the same as your savings account. In fact, this emergency cash is generally there to help make sure that you don’t need to tap into either your savings or additional sources of capital like overdraft money or personal loans.
3. Find Creative Ways to Cut Back on Spending
Once you know how much you’re spending each month, and how much you’d like to have left behind for savings, emergency money, and other expenses, you can begin to look for creative ways to manage your money. A lot of people assume that budgeting is all about compromising and giving up on the things they like. While you may have to cut down on certain bad spending habits, like buying several takeaways each week, you can also:
- Compare options for monthly bills and consider switching to an alternative provider
- Get rid of subscriptions and unnecessary expenses that are costing you money
- Look for discounts and vouchers whenever you make a big purchase
4. Switch Debit and Credit Cards for Cash
Finally, a great way to get better control over your spending each month is to use the “envelope” method. This simply means that you automatically pay for certain bills through your bank account each month, like your mortgage, or your insurance payments, but the rest of your day-to-day expenses are managed in cash. For instance, you might give yourself £50 a week to spend on food and nothing more.
When you only have a certain amount of cash to work with while you’re at the supermarket, you’re forced to think more carefully about the items you add to your basket. There’s no opportunity to overspend by diving into your overdraft or relying on loans, because all you have is cash. Cash spending can help you to avoid the common problem of impulse buying too. If you see a deal that you think is great for you, you’ll have to go home to retrieve more money or a credit card, and this gives you time to think about each purchase before you make it.