You never really stop learning about how to manage money better and it is often the case that many of your lessons can be painful ones when you take what turns out to be a poor decision which ends up costing you.
Here is a look at the delicate art of balancing your finances and how to gain more confidence with your case. It includes an overview of why creating a ‘spending plan’ will help you to gain greater control, why you need to carry out a financial audit, and how to use that information in a positive way.
Have a plan for your money
If you find yourself short of cash and having to use short term lending options to get yourself out of a tight fix it makes sense to try and get to the route of the problem and why you ran out of money.
There can be many plausible explanations such as being presented with an unexpected repair bill that you hadn’t budgeted for, but if you have a spending and saving plan in place there is more chance that you would be able to deal with that sort of scenario more calmly.
A good starting point would be to create a household budget so that you know exactly how much money you need each month to cover the essential bills like rent or mortgage payments, utilities, and food.
Make sure you automate as many of these outgoings as possible so that they are taken care of when you get paid and you know what you have left to spend on other items.
Know where you stand
It will give you greater peace of mind when you have a better idea of exactly where you stand with your money, which you can do by taking stock of how much you have in assets like property, investments, and savings, and compare this with how much you owe.
Balancing your assets against your liabilities might not always create a pretty picture and it could even reveal that you are in a negative financial situation but even when that is the case you at least have a greater sense of where you stand and what you need to do to put matters right.
One of the key factors when trying to gain better control of your money and stop worrying constantly is to carry out a regular personal audit to confirm your financial situation.
Identify where changes need to be made
If you have created your budget and carried out a review of your overall financial picture you are now in a good position to create a viable plan of action to target where savings can be achieved and changes made.
Break down your expenses into several sections starting with essential payments and take a look at what sort of level your discretionary spending is for each month.
You can’t make adjustments to essential payments like your rent or mortgage but you can definitely target your discretionary spending and see where you could reduce your spending.
It is worth remembering that it is generally suggested you try to save at least 10% or more of your income toward future financial goals like retirement and having some money set aside in an emergency fund will help you avoid resorting to expensive borrowing options when you are faced with an unexpected bill that you can’t meet out of your regular monthly income.
You might need to make some adjustments to your lifestyle to improve your financial position such as reducing the number of times you dine out or go to the movies each month, but it is often worth it when you enjoy a greater feeling of financial security because you are in better control of where your cash is going.
Set some goals
Another good way of reducing your worries about money is to make use of your regular budgeting and financial audits as a way of helping you to set some realistic future financial goals.
When you can see your financial future more clearly and know how much you need to save for retirement and other key financial goals, including major life events like getting married or sending your kids to college, it is bound to give you a greater sense of calm when the subject of money is raised.
Take greater control over where your money is going and it will help you to stop worrying about your finances.
Scarlett Miller works as an accountant and is always on the lookout for the latest financial news. When she discovers something, she enjoys writing about it on various financial blogs.