Jasmine Birtles
Your money-making expert. Financial journalist, TV and radio personality.
Five ways to improve your finances
Moneymagpie Team
28th Feb 2024
Feeling overwhelmed with your finances? It’s easy to get discouraged if you struggle to stay on top of your spending and achieve your financial goals.
Yet taking control of your finances doesn’t have to be complicated. You transform your financial outlook with a few simple methods. So, what are they?
In this article, we’ll share five ways to improve your finances.
1. Make a budget
You need to understand your financial situation before you can start to improve it. When you have an accurate idea of how much money you have to spend, it’s possible for you to allocate it across your different financial goals.
This is why it’s crucial you create a budget. There are many ways you can do this, but the most essential step is to subtract your typical regular outgoings from your monthly income. This will tell you how much disposable income you have each month.
Then you just need to decide how you’ll spend it. The 50/30/20 rule is a popular and well-balanced rule of thumb you can follow.
2. Pay yourself first
For many people, sticking to a budget seems impossible. Sure, putting your money where it needs to go each month can feel like a chore. But before you procrastinate, consider that you’ll probably spend all your disposable income if you wait until the end of the month. That’s why it’s best to do it as soon as you get paid. You can even set up standing orders to make the process is simple as possible.
3. Build an emergency fund
Emergencies and surprise expenses tend to crop up when we least expect them. When they do, having a safety net to fall back on can help you keep your finances on track. That’s why you should save up around 3-6 months’ worth of your typical expenses in case of a rainy day. This will let you continue to meet your financial obligations if you lose your job or suffer an accident, without giving up your quality of life.
4. Clear your debts
Debt isn’t a burden you want to shoulder. The power of compound interest makes debt grow exponentially the longer you don’t pay it off, so it’s best to get rid of it as quickly as possible. There are several ways you can go about doing this, including taking out a debt consolidation loan to make it easier to repay multiple debts, or using clever debt clearing strategies like the snowball or avalanche methods. No matter which you pick, make sure you always make your minimum repayments on all debts so they don’t grow any larger than they already are.
5. Start investing
Many people don’t know that the savings could actually be losing value, unless it’s earning interest at a rate that at least matches inflation. So, it’s vital you invest some of your money to help it keep its buying power. This doesn’t mean putting your money into high-risk assets like cryptocurrency. You can use a simple stocks and shares ISA for index trading funds like the S&P 500, which has a strong track record of steady growth returns.
Taking charge of your finances can seem daunting. Remember that progress takes time and consistency. By implementing the advice above and maintain effort over the long term, you’ll be well on your way to achieving financial stability before you know it.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.
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