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Ten Good Habits for Improving Your Finances

By: Kevin Dowling BA (IMC) - Updated: 7 Apr 2012 | comments*Discuss
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Most of us have to learn how to handle our finances over time. If you follow the ten steps below, you will develop good money management habits and increase your financial well-being.

1. Get Organised

The first good habit to learn is to be organised. The sooner you get a clear understanding of your financial situation, the quicker you’ll be able to improve your finances.

Start with a pen and paper and put down all your monthly income. Next, work out your monthly expenses, such as mortgage repayments, credit card bills, personal loans, council tax and utility bills.

Once you have an idea of how much money you have to pay out each month, you can think about where you might be able to reduce your expenses, or perhaps think about increasing your income.

2. Don’t be in Denial About Money Problems

Make sure you open your bills when you get them, so that you know exactly what money you owe to whom, and when. Money troubles can be very upsetting, but nobody is going to sort them out other than you. The worse thing you can do is ignore your financial situation, stop opening your bills and act like nothing is wrong.

There are plenty of sources of free advice, such as the National Debtline or the Citizens Advice Bureau, who will be able to help you work out your financial position and what you need to do to improve it.

3. Check your Bank Balances Regularly

Keep track of the state of your current account on a regular basis, either on line or at a cash machine, and you’ll avoid getting overdrawn by mistake and paying costly bank charges. More importantly, by checking your account regularly you’ll spot any errors or fraud on your account as early as possible.

4. Start Living Within Your Means

Once you have drawn up a monthly list of your income and expenses, make sure that you start living within your means. Borrowing money to pay for monthly outgoings, such as food and shopping bills should be avoided at all costs.

5. Use Direct Debits

Set up direct debits for your regular bills, including your credit cards. That way you won’t miss any payments and you can make additional payments with any spare money each month.

6. Get a Shredder

Keep all your financial documents in one place (a file box is usually best) and shred any old documents instead of throwing them out with the rubbish. You’ll be amazed how therapeutic it feels to pay off your debts and to shred all of the accompanying statements that went with the debt!

7. Be Friendly With Your Lenders

Always be polite and courteous with companies that you owe money to. If you are finding it difficult to keep up with scheduled payments, talk to the lender as soon as you can, explaining your situation and asking for their advice. They may be able to help you.

8. Start Saving

The best habit you’ll ever learn is to switch from being a borrower to a saver. Start by setting aside a regular amount each month – create an automatic payment to come out from your account soon after your salary gets paid.

Over time, your regular savings should start to grow. You should aim to create an ‘emergency pot’ of between one and two months’ salary.

9. Think Ahead to Your Retirement

No matter how old – or young you are – it makes sense to think about your retirement as early as you can. Paying even a small amount into a pension when you are young will see your pension pot grow considerably in later years.

10. Don’t let Money Worries Take Over

No matter how precarious your financial predicament, don’t let it take over your life. As the famous Irish novelist Jonathan Swift wisely said “a wise person should have money in their head, but not in their heart.”

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