In the past year people have cited many reasons for their financial woes — company closures, redundancy, pay cuts, and more. The pandemic seems to have given people excuses not to check their financial health.
All these challenges have resulted in people getting into financial difficulties, as many did not have savings to fall back on. It presents a rather grim situation for anyone trying to get on top of their finances and stay in the black.
It’s not all bad news though as some of the factors that lead people to get into financial difficulties are preventable. Here are nine simple habits that can help improve your financial health.
1. Know Your Numbers
Emmanuel Asuquo, a financial advisor, as seen on BBC’s Channel 4’s Save Well, Spend Better, said one critical step to overcoming financial difficulties and improving your financial health is to know your numbers.
“You should know your numbers,” he said. “Know what’s in your bank account, know what comes in and what goes out. Know what you spend your money on, how often, and why.”
2. Make Budgeting a Priority
You cannot ignore the role budgeting plays in your financial health. This doesn’t mean that you have to spend a lot of time drawing up a budget and accounting for every penny. What it does mean, however, is that you are able to allocate categories for each type of spend, thus helping you monitor your outgoings.
Breaking down your spending into specific categories can help you identify and cut back on unnecessary expenditure which could be draining your finances. Cut back on unnecessary subscriptions or outings where you have to pay out large sums of money for entry fees and entertainment.
Sticking to a budget can help you avoid some of the risk factors such as overdraft fees, credit card fees, late payment fees, and penalties which can lead to financial ruin. Emmanuel said that following a financial budget which focuses on saving is a basis for staying in the black and achieving financial freedom.
All this may sound easy in theory but putting it into practice takes determination and discipline. For example, one of the main challenges most people face is sticking to a budget when grocery shopping. Stores now sell a lot of convenience food. It’s much easier to buy meals that are already prepared, even though they cost more, rather than cooking meals from scratch.
This point may be a little controversial, but the truth is that people pay for convenience. That convenience comes at a cost.
3. Prepare Meals From Scratch at least Once a Week
People who are able to save money tend to prepare the majority of their meals from scratch. They will still have special pizza nights, for example, but instead of forking out £20 for a pizza they will buy the ingredients and prepare everything from scratch. Some even prepare batches of pizzas and freeze them for when they need them. It can be a relaxing and fun activity for friends or families, yet most people don’t ever get to do this.
When most people think of home-cooked meals they think they have to do it every single day and it puts them off. You can start with one or two meals. It doesn’t mean you have to prepare every single meal from scratch if you’re just starting out.
You can start off with something easy. Try by buying fresh potatoes and making your own potato wedges. Instead of buying garlic bread you could buy a baguette, some fresh garlic, butter and parsley and quickly make your own version of garlic bread.
It is better to start off by experimenting with the foods that you not only enjoy eating, but are also easy and quick to prepare.
It easier to stick to doing something that you want to do and enjoy doing. It mustn’t feel like a punishment.
4. Leave Your Bank Card at Home and Use Cash Instead
When you use your bank card for purchases all the time you are also more likely to the spend more.
You can set yourself up for success by training yourself to pay for items using cash, and sticking to a shopping list. Only carry enough cash for the items that you need to buy.
5. Find Free Activities for Entertainment
Entertainment is good for your health and well-being but it doesn’t have to come at a cost. There are lots of activities that you can do for free which are not only good for your physical health but also good for your finances. You can, for example, play board games, go for a walk, take up running, watch free movies, engage in a hobby or learn a new skill.
Set some time aside during the day which is gadget free. Put away your phones, no checking emails or social media, and no laptops. This will force you to find creative ways of entertaining yourself, your friends and your family.
6. Set Weekly Savings Targets
Your ability to save money is a good indicator of your financial health. If you are unable to save money at all, you are more likely to experience financial difficulties.
People with low income or huge financial obligations are more likely to fall into this category. You don’t need to save a huge sum of money all in one go. A small amount put away on a regular and consistent basis can make a big difference in the long term.
Saving as little as £1 per week means you would have an extra £52 at the end of the year. This is a much better position to be in than being in the red.
7. If You Don’t Need It, Don’t Buy It
Impulsive buying is a bad habit that can be difficult to give up. However, it is very important to try and curb this habit as undisciplined spending will erode your savings goals.
When people stop impulsive buying and watch their savings grow, the joy they derive is preferable to the anguish of being in debt. Debt only attracts guilty feelings over purchases of things that they neither needed nor could afford.
Most people don’t stick to their savings goals when they first attempt it but that is no reason to stop trying.
8. Don’t Be Afraid to Ask for Help
People who have never exercised financial discipline may find it difficult to implement changes. If you are in this position, accept that this can happen and don’t beat yourself up for it. Don’t be afraid to ask for help from a financial advisor either.
According to financial advisors people who have been in debt are more likely to acquire more debt if they don’t receive the right advice and support. People can become resistant when they hear the word financial advisor. Some are too embarrassed to talk to anyone about their financial problems.
“I’ve tried that before and it didn’t work for me,” some will say.
Financial advice only works well if it is also combined with implementing and practicing good financial habits. Financial advisors can give you tips on what to do but they cannot physically make you do it. It’s all up to you. If you follow the advice you are more likely to get good outcomes.
9. Make-up Plan to Start Now
It doesn’t matter how bad the situation looks you can still start now where you are with what you have. Financial ruin doesn’t happen in a day. It is the culmination of a series of bad habits or decisions made over a period of time. Weeks or months of bad spending habits, or wrong advice can be to blame.
People who experience financial difficulties later in life may have failed to practice good financial habits in their younger years.
Don’t put off saving money, don’t put off budgeting. It is never too early to start. The earlier you start, the better prepared you will be to weather any financial storm. It is never too late to start either, so if you are in your mature years you can still put these habits into practice.