From a young age I became very familiar with the concept of ‘good financial management.’ My parents had taught me the importance of controlled spending and diligent saving along with many other important financial principles.
But I know that this was not the case for many others. In fact during university I encountered a lot of people that consistently told me that ‘saving was just too difficult,’ and I began to realise that many people did not really understand how to properly plan and manage their finances.
Sustainable and good financial management is not just about being able to spend in more efficient ways or knowing how to save more. Jeff Letsz, who is a pastor, entrepreneur and a public speaker, believes that good financial management should incorporate the following 5 principles:
- Risk Management – this is about protection and investing in insurance plans
- Debt Management – he believes it is possible to live a debt free life (aside from mortgage and loan repayments)
- Expense Management – looking at ways to efficiently spend and to better control spending habits
- Asset Management – putting your money in to short and long term investment portfolios
- Income Management – Not relying on only one stream of income
But before these building blocks can be developed, it is important to understand and learn how to develop better spending and saving habits.
I think that people find it hard to save because they see it as a barrier to enjoying in the present rather than a means for reaching future goals. In order to have true sustainable financial growth, this mentality needs to be changed. And once this change is achieved, it will become a way of living.
So below I have listed some tips on better ways to spend and save money:
1. Have a Goal
What are you saving towards? Perhaps it is a new car or a holiday. Once you know your goal you can break it down in to monetary terms.
For example, a car that you want might cost £5000. You may decide that you want to buy this car within the next 7 months. If you were to save £800 a month towards this car, by the 7th month you would have saved £5,600. You can then use the surplus of £600 towards a secondary goal or a savings account that accumulates interest.
2. Track your spending
At the beginning of this year I created an excel spreadsheet that allowed me to thoroughly track my spending. Within it my income streams and categorical outgoings (e.g. mandatory expenses such as car insurance, leisure/entertainment, food and drink etc.) were listed.
In doing this I was able to highlight the categories where I spent the most amount of money and this allowed me to cut out and reduce any unnecessary spending.
3. Budget for the month ahead
Once you have been able to track and become well acquainted with your spending habits it will become easier to budget for the upcoming months.
Create a budgeting plan for each spending category and this will allow you to have an index by which you control your spending.
This could also include budgeting to save. For example deciding that you want to save £800 a month.
Earlier in the year my 25 year old cousin purchased his first property. I asked him ‘how did you do it?’ And he replied ‘sacrifice!’
When you are truly working hard to reach financial goals it will take a lot of sacrifice and commitment. It may mean that you may have to go out less, eat out less, shop less and so on. But if you are really serious then you will do it!
What unnecessary expenses can you put an end to, to help you save more?
Most importantly stick to your budgeting plan and goals. There have been many times that I did not stick to my budgeting plan and I had to deal with the unfortunate consequences. The best thing to do is to exercise restraint as sticking to the plan will only benefit you in the long run.
Be smart with how you spend your money. As a Christian I believe that we are stewards and everything we own is Gods. Therefore we need to be responsible with how we handle Gods gifts to us. And money is surely a gift. We will only receive increase when we prove ourselves with the gifts the God has already given us.
“For whoever has, to him more will be given, and he will have abundance. But whoever does not have, even what he has will be taken away from him.” (Matthew 13:12)
Once you learn that good financial management should be a lifestyle and not be treated as a hindrance, I believe that success and growth will be yours!
Please comment below with any of your saving advice and tips!