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Taking control of your money habits

Analaura Luna

If you’re like a lot of people out there then you probably find yourself living from one payday to the next, hoping that the pay cycle will end before you run out of cash. If you’d like to stop living with such stress and uncertainty then today’s as good a time as any to start getting your money management under control and creating a better foundation for the future. You can begin to turn your finances around simply by following these four easy steps:

Step One
Recent studies revealed that many of us are only as wealthy as our ten closest friends. While this may seem like coincidence, the reality is that we often take ‘financial’ advice from our friends. While they might mean well, and almost certainly have the best intentions, there’s no point in taking financial advice from people who aren’t in a better financial position than you are. It doesn’t matter if they have a degree in finance, or if they’ve been working in the bank for years, or even if they got lucky with some good stocks a while back – if they’re not sitting in top of a secure financial foundation they are not a good example for you to follow. Simply put, this first step is to stop taking advice from friends who are in the same, or worse, financial shape than you.

Step Two
The next step is to confront the reality of your situation. The majority of people don’t keep track of what goes in and out of their bank accounts and have no idea of what’s really happening in their financial life. If you don’t know what’s happening then you can’t be in charge and this feeling of not being in control is a stressful one. Keeping a written record of your finances may be a daunting proposition, but without doing it you’ll never know where you are financially, which will lead to spending when you really can’t afford to and before long you’ll be stepping onto the debt treadmill.

Step Three
The third step is to get your credit under control. Easy-access credit is the biggest financial evil most people face – whipping out the plastic is one of the fastest ways to create a habit of overspending, because if you don’t actually have to handle the cash then spending it doesn’t seem as real. Studies have revealed that people spend up to 40 per cent more than they can afford when they use plastic, so even if you pay your credit cards off in full every month, chances are you’re spending more than you would if you paid cash in the first place. Ignore all of the tempting rewards points and bonus programs that credit providers offer as bait to lure you into using their cards; most people never end up acquiring enough points to do anything worthwhile with them. Instead, focus on the bonus of having more money left in your pocket if you pay cash.

Step Four
The final step is to clear your debts as quickly as possible, or to start saving if you have no debt. It doesn’t matter which of these goals you’re aiming for, the basic principle of achieving them remains the same. Here’s what to do: being brutally honest about how much you could actually live without, set aside an amount of money that you will put toward achieving your goal each month and then arrange a direct debit straight onto the debt or into a hard-to-access online savings account. Then pretend you never had that money in the first place and learn to live without it – you’ll be able to manage just fine, most people are far more resourceful and disciplined than they give themselves credit for and are able to get by with a lot less if need be. The biggest mistake people make when it comes to this step is ‘paying themselves last’ – handing money over for bills and expenses each month and saving what little is left over – and all that this does is ensure that you’ll stay broke. Start paying yourself first and adjust the rest of your expenses around what’s left and you’ll be ahead before you know it.

Following each of these steps will help you to regain control over your money management habits – you’ll start feeling better about your financial situation, and the funny part is that this confidence is usually all people really need to start turning their financial lives around. And the key to achieving any goal is to be confident and in control. Give it a shot – it really is as simple as it seems!

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Author's Biography

Analaura Luna is an author, wealth adviser and founder of Your Family Your Money. Your Family Your Money’s goal is to simplify traditionally complex financial strategies, demystify financial jargon and debunk common financial myths, becoming every family’s first stop for financial advice, information and inspiration.