With the economy continuing to struggle, markets fluctuating and job security in jeopardy, it is no wonder that many people are concerned about their financial futures. In such uncertain times, feeling out of control -- especially when it comes to finances -- can lead to unnecessary stress. To take back control and alleviate anxiety, here are five tips to help you manage your household finances.
1. Create a spending plan
The term "budget" can sound restrictive -- but let's face it, we all have living expenses and they're not always easy to stay on top of. Instead of a budget, create a spending plan by using a spreadsheet to list all your monthly bills and find out where your money is going. There are also online tools that can help you build your plan. Add up your costs and deduct them from your income to be sure the amount you are spending plus your savings is less than the amount you're earning.
2. Find places to save
Once you have your spending plan in place, take a look at your monthly bills to find places to save. For example, check out your home phone, Internet service, cellphone plans -- and are you really watching all those TV channels you're paying for? Can you save on insurance costs by bundling your home and car policies? Can you reduce transportation costs by leaving the car at home a couple of days a week or carpooling? You may be surprised by just how much you can reduce your monthly costs and free up funds for saving and investing.
3. Identify your financial goals
We all know we need to save money, but the proverbial "rainy day" may seem a bit vague. Having a specific goal you want to reach -- whether it's buying your first home, funding your child's education or renovating to give you the spa bathroom of your dreams -- is a good incentive to save. This tangible goal will give you a great reason to pack a lunch for work, forgo the $5 latte and walk past that sale sign at the mall.
4. Pay off debt
Carrying consumer debt can be draining on your mind as well as your wallet, and paying it off is a good way to feel more in control of your household finances. Some experts say to start with the highest interest rate credit card first since it is costing the most. Others recommend starting with the smallest amount because paying it off gives you a sense of accomplishment that encourages you to keep going. Whichever works for you, commit to paying off your debt today.
You can also go to your bank to talk about consolidating your debts into one monthly payment. A line of credit usually carries a lower interest rate so consider using yours to pay off higher interest rate credit cards and have one convenient payment.
5. Set up an emergency fund
It is important to have money set aside in case you have a job disruption or an unplanned expense. In the article "Prepare for the worst and make 2016 the year of the emergency fund", Rob Carrick writes that an alarmingly large number of people don't have an emergency fund.
It is usually recommended that this fund have enough money to cover three to six months of living expenses. Carrick writes, "Think of an emergency fund as insurance against a short-term setback that affects your long-term financial goals." He also cautions that retirement savings and lines of credit should not be considered emergency funds.
Do you feel you have a solid financial plan in place or do you need help identifying your goals and determining which saving and investment strategy is right for you? Invisor offers Canadian investors personalized investment management solutions at a fraction of the cost of traditional advisor models, without requiring any minimum investment amounts.
Pramod Udiaver is the Co-founder and Chief Executive Officer of Invisor Investment Management Inc., one of Canada's leading online financial advisors that provides personalized investment management services. Passionate about personal finance and a student of financial markets himself, Pramod & his team's mission at Invisor is to simplify investing and help Canadians reach their financial dreams sooner.
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“The easiest way to save a bit of dosh is to automate your saving,” says Vivi. “Set up a standing order with your bank and take the hassle out of remembering to save. If £50 or even £20 is saved each month (especially into a new ISA) your pot will get bigger fast. Increase the amount you save by £10 or £20 on your birthday, at the start of a new year and at Halloween and watch your money grow.”
“When you're shopping, in person or online, one of the easiest ways to make big all-round savings with very little effort is get into the habit of using the Three Cs,” explains Penny. “That's Comparison, Codes (or vouchers or discounts), and Cashback. Comparison means you don't overpay, codes get you extra money off, and cashback is the icing on the cake where you might belatedly get a small refund on what you spent.”
This is an obvious one, but you would be amazed at the amount of products that get wasted every single day. You don’t have to go without your favourite things, but as Rebekah Hoffer from Simply Rebekah advises, “if you use a little less of them, you’ll stretch those products further." "It is better to go back for a little more shampoo than to use too much to begin with!” Similarly, don’t waste what you buy. Rebekah says: “Keep a container in your freezer for leftover veggies that you can add to regularly. Then when the container is full, make soup. Also, cut the tops off your ‘empty’ toothpaste, face wash, and lotion… there is more left in there than you think!” Before you throw anything away, check to see if you can re-use them. Things like tin foil, paper towels and gift bags and bows are often binned after one use.
You don’t have to buy a top name brand when value brands work just as well, advises My Family Club: “Don’t feel under pressure to have what other people do." "And teach your children not to worry about peer pressure either, so they don’t feel the need to have all the latest gadgets and brands.”
Cashback cards can help you save money, says Karen Bryan from Help Me To Save, but warns they’re only cost-effective “as long as there are no additional fees for paying by credit card instead of debit card, the card doesn't have an annual fee and you pay off the full credit card balance to avoid paying any interest on purchases.” Vivi adds: “Ask your bank if they have a ‘save the change’ facility. Lloyds, for example, round up every card purchase and save the change in a separate account. So if you buy a coffee using your card and it costs £2.30 then 70p will automatically be deposited into your saving account. Simple.”
Doing your research on finding the cheapest car insurance, MOTs, breakdown cover and so on can obviously save you money, but “it’s possible to save up to £800 a year on petrol if you change the way you drive”, says Cass Bailey of Frugal Family. “Keep your tyres inflated to the correct pressure. As well as making your car more fuel efficient, it’s also safer for you and your passengers,” she points out. “Don’t use your air conditioning unless you have to – just wind a window down. Turn your engine off as soon as you reach your destination.” You’ll find more of her ideas on fuel-efficiency here
“Turn watching the pennies into a game,” says Penny. “It's relatively painless, and it's far easier than mentally forcing yourself to 'sit down and do the household accounts. I'm currently trying out the free version of the Toshl Finance app and finding it attractively laid out and easy to use. It even has little cartoon 'savings monsters' to point out areas where you could save more."
If you have a certain amount of money in your purse, you’ll think twice about spending most of it on impulse. As Vivi points out: “It is always easy to overspend if you use a credit card, when cash runs out it's done. You are in control.”
Congratulations. You’ve been saving money without realising even as we speak! You can pass the time reading sites just like this at no cost. Anna Newell-Jones, of And Then We Saved suggests you go even further: “We all have our favourite blogs and websites; see what the beginning was like by digging through the archives.”
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