Although it’s widely suggested that money doesn’t make you happy, knowing you have a pot of savings to fall back on can make life a lot easier. Unexpected things can happen, which can leave you struggling for money, so having a bit of money set aside is something we should all strive to do. If, for example, you lose your job or you are hit with a very large household bill, it could severely impact your bank balance as well as your lifestyle.
Before you can formulate a plan in terms of savings, you must first deal with any debt (excluding a mortgage) that you may have. Clearing debt can be daunting, and although you might prefer to stick your head in the sand and pretend it isn’t there, it’s not going to just disappear. Dealing with it head-on will help you to become debt-free and allow you to focus on stabilizing your financial future.
If you currently don’t give your finances the attention they deserve or find yourself unable to save each month, there are many things you can do to turn things around. Here are 6 ways to sort out your finances and save money.
Clear your debt
List each debt, the outstanding term, and the interest rate charged. The higher the interest rate, the more money you are throwing down the drain, so focus on paying off the highest rate first. Cut back on spending and plow any extra money you have into clearing your outstanding debt.
Do you need to consider declaring yourself bankrupt?
If you are drowning in debt and feel there is no way out apart from declaring bankruptcy, it’s important to do research and weigh up your options before making the decision. There are many great bankruptcy resources online which will provide you with lots of great advice as well as the short and long term pros and cons. It’s not a decision that should be taken lightly, so make sure you are well informed first.
Reduce your mortgage term
Remortgaging allows you to redefine the terms of your outstanding loan. Reducing your mortgage term, in particular, can save you thousands over the lifetime of your mortgage. Monthly payments will, of course, be higher, but your mortgage will be paid off in a shorter amount of time, allowing you to use the surplus cash on other things.
Open multiple bank accounts
A great way to manage your cash is to open multiple bank accounts – one for each set of expenditures. For example, your car probably costs a fair amount each year to run, so paying for it all in one go could make a rather large dent in your finances. Add up approximate costs for things like insurance, servicing, maintenance, etc. so you know how much, on average, you spend in a year. Divide the total by 12 then set that figure aside in a separate account each month.
Do the same for things like Christmas and birthdays, home insurance, and any other annual expenses. When the time comes, the amount needed will be accounted for and you won’t feel the pinch in one go.
Reduce your spending
There are hundreds of ways to reduce your spending, and you might be surprised at how much you could save if you put your mind to it. A few prime examples of where it’s easy to overspend are on things like groceries and beauty products. If you have a freezer stocked full of food, use what you can before visiting the supermarket again. Plan meals around what you already have, and only buy essentials.
Have a search around your home, and you will probably find loads of half-used shampoos, hand soaps, foundations and moisturizers, etc. Make a list of what you have and promise yourself that you won’t buy any more until your current stocks have depleted.
Declutter and sell what you can
If you have items around your home that are of value but you either don’t use them or don’t like them, consider selling them and putting the money you make towards your savings. From furniture that’s seen better days to toys that your children no longer play with, gather them all up and see how much you can make.
Garage sales are a popular way to sell things quickly or list them on some of the many online selling platforms available. Not only is decluttering your home therapeutic, but it can also have a hugely positive impact on your finances.
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.