Ask the Expert: What should I do to manage my money better?

Q: My finances are a mess. What should I do to manage my money better?

A: First, take a deep breath. The first thing you need to do when you want to manage your finances is to actually look at your finances.

If you don’t balance your outgoing spend with your income, you will begin to struggle to make ends meet, and if you turn to short term fixes such as credit cards and payday loans you can find yourself starting to struggle with further debt.
A budget is a good place to start: find out exactly how much you spend a month. Take all accounts into consideration here: from your main bank account to any credit or store cards. You can use your statements to track exactly how much you spend on items, from bills to your weekly supermarket shop.

To make it easier, you can categorise your spending into groupings such as household bills, living costs, borrowings and leisure.

It’s best to take a look at finances over a few months in order to fully see your budget and from this you can see where your excess spending is, and if there is anywhere you can cut back.
There are some payments which can’t change: rent, council tax and your TV license, for instance. However, there are some that you could be able to make simple savings with.
If you have a mortgage, have you got the best rate available and can you change the type of mortgage to reduce your payments? Are you on the best deal for you? If not this can be a way of reducing your monthly costs with the cost of mortgage borrowing at an all-time low.

Also make sure you’re on the most cost effective and suitable mobile contract for your needs and look at things such as your utilities. You should constantly check out the options to switch your gas and electricity provider for example. A uSwitch survey from June 2017 found that the average annual saving made by customers switching energy tariffs has risen to $292: that’s over $1,000 over four years.

Even if you are already on the cheapest supplier and best tariff, there are still some things to check to make sure you are getting the best deal: for example, paying by Direct Debit can save you money.
There may also be smaller but effective ways to save money based on your budget, for example, if you spend money buying your lunch each day, you could save by bringing in a packed lunch instead. It also worth looking at what you spend on clothes, nights-out and gadgets.
Little things like this can add up and help you to balance your finances better.

If you find from looking at your finances that you have a lot of loans and credit or store card debts to pay off, it makes sense to pay off the debt with the largest interest first. Personal loans from banks, for instance, normally charge a lower interest rate than store cards, so you can save yourself money by paying off the store card first. However, make sure that you don’t break any terms of agreements, and that you continue to make the minimum payments for any other debts.

Money management is a really handy skill to have - and it’s not difficult to get the hang of it.

Keeping on top of your finances will help you to save more, spend less, and build up a financial safety net for any unexpected expenses. Good money management is not just important for your finances. Worrying about your finances can cause stress, anxiety and countless sleepless nights!
Poor money management can cause all sorts of trouble, financial and otherwise. If you don’t balance your income with your outgoings, you’ll quickly find yourself struggling to make ends meet. Not only will bills start piling up, but credit repayments may get out of control and you’ll be low on money for essential items like food and household bills. You might then take out a loan to cover the cost of these items as a short-term fix, only to find that it becomes a long-term problem as you continue to struggle to pay back money you owe. So if you’re looking for some tips on managing your money, read on.

Make a budget and stick to it

If you want to avoid any financial shortfalls and comfortably keep up with your bills, repayments and essential spending, a budget is a great place to start. It lets you keep an eye on how much money you have coming in (your salary or wages) and how much you spend on everything month to month.
It’s really easy to create a budget. There are plenty of free online budget planners (the Money Advice Service, for example, offers a number of different tools to help with this), but you could just use a spreadsheet on your computer or even a pen and paper. Whichever method you use, make sure that you include all of the money you earn or receive each month, including your salary or wage, benefits and tax credits. Also include the money that you spend on things like your rent or mortgage, insurance, credit payments. Add to these your food, clothing and entertainment expenditure – be realistic and honest with yourself – if you are realistic with your budget, the more likely you are to stick to it.
Once you have this all written down, you can go through line by line and identify areas where you can make cutbacks and save money. Could you buy your groceries from a cheaper supermarket? Is there any way that you could get a better car insurance policy? Are you spending a lot of money on unnecessary extras that you could do without? Remember that those coffees on the way to work add up and could be costing you £50 a month which could be spent elsewhere!
A budget will help you identify what your financial priorities are as well as areas you can save. Focus on those priorities and make sure that you stay on top of essential payments such as your rent or mortgage, gas & electricity and council tax.
Then prioritise your credit repayments – can you save here? Check the rates you are paying on your loans and credit card balances. It may be that a consolidation loan can save you money here and help you balance your budget.

Budgeting tools make it even easier

When you sit down to draw up your budget plan, try using an online budget planner to help. Online tools make it even easier to get your finances in order, and most take you through the process step-by-step. They will ensure that you capture every expense, so that nothing comes along to derail your budget.
A full budget plan can take around 20 minutes or more to complete, but don’t let this put you off - it’s essential if you want to get your finances in order. It might be helpful to have copies of your household bills, payslips, receipts, and bank and credit card statements to hand so that you can refer to these for accurate information.
Online budget planners ask you for information about your income, including things like your salary and any benefits or student loans you might receive. Further into an online budget plan, you’ll be asked to provide information about your expenses, which includes essential payments like rent, mortgage, loans, utilities and insurance, and all nonessential spending.

Money-saving advice

Saving might not seem like a lot of fun, but setting aside an amount of money each month can help keep you out of any financial difficulty later on. Working out how to save any money whilst still paying bills and essential spending can be a bit of a headache though. So how can you save money each month?
It’s actually easier than you might think. When you create your budget plan, be as accurate as you can with the amounts you earn and spend. Your budget should detail how much you spend on key expenses and nonessential extras, and being realistic about these amounts will give you a better idea of how much you have left over in your budget every month.
When it comes to saving money, even small changes make a big difference. Things like turning the heating down a little and switching electrical appliances off after you’ve used them helps save plenty of pounds that’ll add up at the end of the month. And you can make even smaller changes to save loads of money, like skipping that nice takeaway coffee you pick up every day. You’ll be surprised by just how much money you save.
With the bigger things like gas and electricity, it often doesn’t pay to be loyal to one supplier. Energy providers typically reserve their best deals for new customers, so shop around to find a cheaper deal elsewhere. You can use comparison sites like MoneySupermarket and uSwitch to quickly and easily see the cheapest offers on the market - and if you find a better deal, switch.
Organising your debts is also a great way of helping you save money. If you have multiple debts (particularly on credit cards) then these will take up a large chunk of your monthly expenditure. But if you prioritise paying off the card or loan that charges the highest amount of interest, you’ll avoid building up interest - and more debt. Alternatively think about consolidating your debts into one loan – this may require lower regular repayments freeing up some money each month for you to save.

Many consumers unknowingly practice bad spending habits that leave them deep in debt. Learning how to stop bad spending habits and how to stop overspending takes commitment, awareness and practice.

Chief among bad spending habits is carrying too much debt. Although some level of debt is to be expected, carrying too much debt can result in dire outcomes.

“The growing use of credit among American households, particularly following the Great Recession, has different implications across generations. Although most households have more assets than debt, 80 percent hold some form of debt and that can signal economic opportunity and potential trouble. For example, accruing some debt at an early age can encourage wealth-building, but too much debt later in life can increase financial insecurity.”

Bad Spending Habits, and How to Break Them

If consumers are seeking to establish financial security, a good place to start is to get serious about debt reduction. Begin by identifying bad spending habits, make adjustments to reduce cash outlays, and take steps to reduce debt.

The following list identifies some common bad spending habits as well as suggestions to help develop successful money management habits:

1. Failing to Budget

Failing to keep track of income and monthly expenses is a recipe for financial disaster. Consumers that “spend as they go” without planning for upcoming obligations run the risk of coming up short.

Solution:

Set up a budget by compiling a list of all monthly expenses. Divide the list into two columns:

Necessary expenses (rent or mortgage, food, utilities, phone, car payment, insurance, etc.); and,
Discretionary Expenses (entertainment, clothing, club memberships, etc.)
Next, subtract the two amounts from income. The difference reveals positive or negative cash flow.
Cut expenses if overspending. Reduce discretionary expenses to increase available cash.

2. Impulse Buying

Retailers today are savvy when it comes to consumer buying habits. There is a reason goods are placed near the checkout, on the shelf at eye-level or are marked down. Retailers want consumers to buy and they understand buying triggers.

Solution:

Try these tips to learn how to stop overspending and gain control of the shopping budget:

Shop with a list: If an item is not on the list, don’t buy it. Unplanned buying equals overspending.
Delay unplanned purchases: Take 24 hours to decide if the purchase is really necessary.
Shop without your kids: Kid-centric products are placed on shelves at a child’s-eye level to entice them to ask parents to buy their favorites.

3. Accruing Credit Card Debt

Credit cards can be life savers when emergencies arise, but using them to buy staples such as food, entertainment and day-to-day bills can result in balances that can quickly get out of control.

Solution:

Limit credit card use to emergencies. Is the unplanned purchase an emergency? If not, don’t put it on a credit card.
Coach yourself with cash: Adopt an envelope system for a few months to track where the money is going. Label one envelope for each expense (“food”, “gas”, etc.) and put the necessary cash for each expense into specific envelopes. Train yourself to buy food with only the cash allocated to food, gas from the gas envelope, etc.

4. Overdrawing Accounts/Late Fees

Banks make big bucks from overdraft fees. (The three biggest banks earned more than $1 billion in fees in a single quarter of 2015!) Financial institutions penalize consumers when they slip into an overdraft or make a late payment. Those fees can quickly drain an account.

Solution:

Set up alerts from checking and credit card accounts that notify consumers by phone or email when minimum balances are met. Most banks and credit card issuers offer this service for free and even offer apps to make tracking balances easier.

5. Paying for Unused Services

One study determined four-out-of-five gym memberships go unused. In most cases, even if club memberships go unused, consumers are expected to pay the monthly dues.

Solution:

Review bank and credit card statements to determine which services are not being used and cancel these memberships. Apply this money toward paying down debt.

6. Emotional Spending

Shopping addiction is a common reaction to the pressures and stress of life. Giving in to temptation to ease that stress by buying a new outfit, eating out or impulsively purchasing a big-ticket item can result in a quick emotional “fix”, but buyer’s remorse and negative financial consequences can follow.

Solution:

Stay focused on the financial goals set in the budget. Being aware that emotional behavior can contribute to overspending.

7. ATM Fees

It may not seem like much, but $3 (or more) surcharge fees for ATM transactions can add up fast. There is no value to the consumer when he or she has to pay to access their own money.

Solution:

Only use ATMs that are connected to your financial institution. Withdraw cash once or twice a month for personal spending. Eliminate multiple trips to the ATM.

Pacific Asian Consortium in Employment offers solutions to overspending.
Consumers who have identified bad spending habits and want to pay down debt may want to consider a debt consolidation loan from Pacific Asian Consortium in Employment. Paying off numerous monthly bills with a debt consolidation loan can make getting on track easier.

Pacific Asian Consortium in Employment offers Prime Loans ranging from $15,000 to $100,000 at 9.9% rate* for an APR of 11.39%* (which is lower than most credit cards) that can be used to consolidate outstanding debt. Personal cash loans can be used to help cover the cost of debt consolidation and build a personal credit score. Pacific Asian Consortium in Employment’s online application process is fast and easy. Qualified borrowers can have cash within hours of submitting an application.