Money management. Just the words can make the best of us break out in a cold sweat. It conjures images of highlighters, huge piles of paperwork and hours upon hours of head-scratching. Plus, who wants to come face-to-face with the indisputable truth that maybe – just maybe – you spend a little too much money on early morning coffees?
Not us, that’s for sure.
The thing is, there are ways of dealing with money management that don’t need to be stressful at all. In fact – dare we say it – some of these tips actually make money management enjoyable. Well, slightly enjoyable, at least.
Bamboo’s top tips for stress-free money management:
#1: Track your spending
The first step on your journey to stress-free money management is to get an idea of your spending habits every month. Now – this might sound a little boring, but the only way you’re going to do this is by looking at your bank statements in detail.
Grab your bank statements (or open your banking app) and total up how much you spend each month. Start from the 1st of the month and sort every penny you’ve spent into categories, from rent and bills to food and entertainment. Also, look at how much comes into your account in wages, benefits and other types of income.
This will give you an overall picture of where you spend the most money, how much you spend on lunch during the week and – importantly – how you spend your money. Some people are splurgers – they spend all their money in the first fortnight and then scrimp until payday, while others are frugal and spend their money slowly over the course of the month. It helps to know which you are so that you can anticipate times of financial drought and prepare for them.
For a breakdown of the best money management apps, check out this article we wrote a little while ago. You’ll also get a good idea of where you can afford to cut back a little – but that’s verging on Tip #2…
#2: Make a budget (and stick to it)
Once you’ve got a rough idea of your spending habits, you can put together a budget for the month. This will help you see how much you can spend on leisure, food and travel every month without overspending. Want an easier way to do this? The Citizen’s Advice Bureau helps you work out your budget. You can set your daily, weekly and monthly budget, see your essential expenses and highlight your non-essential ones.
This gives you a quick understanding of your spending habits to see where you can save a bit of money, where you may be overspending and – even better – where you might be able to spend a little.
#3: Set a savings goal
Saving money – especially when money is tight – isn’t easy. And you’re not alone, across the UK, thousands of people are struggling to save every month. However, it’s much easier to save if you set yourself a goal, no matter how small. And the goal can depend on what you want to save for.
If you’re thinking about the future, tucking away £50 a month means that you’ll save £3000 a year towards your golden days. Alternatively, if you’re dreaming of a new car or that sunny holiday in the Caribbean, then tucking away £100 a month means that you’ll be on the beach within a year.
Contextualising your savings as an investment in your future (rather than as just not spending your money) can have a huge impact on your psychological willingness to save.
#4: Make savings happen without thinking
If you know that you won’t have the willpower to choose saving over a nice meal or a night out with friends (we’ve all been there), then you might want to automate your savings. Setting up a direct debit and automatic transfers into a savings account is the old-fashioned way of doing things, and it still works, but there’s a much easier way to save (and you’ll hardly even notice you’re doing it.
Chip (available for iOS and Android) is a micro-savings money management app that uses its algorithms to look at your spending and work out how much you can afford to save without affecting your day-to-day lifestyle. It then takes this money directly from your account and saves it for you. These amounts are usually £10-£20 and you hardly notice they’re gone, but they sit in an account accumulating 1% interest, which isn’t bad at all.
#5: Anticipate upcoming costs
Before we start, we’d like to say sorry, this money management tip isn’t much fun, but it does make a big difference. If you plan ahead – work out when birthdays, holidays and other costly events are happening – then you can manage your money to accommodate them in advance. For example, if your mum’s birthday is in November, it pays to tighten the purse strings a little in October so that you’ve got a bit of free cash to treat your mum a little. (After all, she deserves it.)
#6: Don’t skimp on the things that make you happy
Here’s an important step that many people forget when managing their money – don’t skimp on the things that make you happy. Saving and being responsible with your money is a great feeling – but you’re not going to enjoy it if the money in your account has come at the cost of you giving up something you enjoy.
For instance, if you love your morning coffee or your weekly yoga class – even if it feels like an unnecessary expense – find a way to make it work within your budget. Saving requires some sacrifices, but it doesn’t mean that you have to be completely miserable.
If you want to treat yourself, treat yourself. In moderation, of course.
#7: Give yourself a safety net
This loops back to savings, but it’s important – once you start caring about money management – to make sure you have a safety net.
That way, if your boiler bursts or your car breaks down, you’re not going to be running back into the open arms of your costly overdraft – you’ll have the safety net there to take care of your unexpected expenses, so you can stay on your feet.
If you’re looking to pinch some pennies or cut back on savings, then head over to the Frugal Lifestyle section of our blog – it’s full to the brim of handy ways to save yourself some cash.