Early on in life, finances are easy. You have a pay cheque, a credit card, and a few obligations to pay every month.
Keeping track of your bills is easy and money is available to pay them immediately. Then things begin to get complicated, you add a car payment, a second credit card, debt, and probably more sources of income, too. This is when keeping track of everything become more and more complicated.
This confusion is double-edged. You may think you’re doing fine, because you have just paid a couple of big bills or you’re anticipating a bonus, without realising that your debt is raising and soon you will be unable to keep up. On the other side, you might be able to improve your cash flow or even save if you time your payments better.
In short, having a better visibility of your financial situation can help you reduce your stress and stay on top your payments. Both factors are essential to leading a healthy financial lifestyle. So when and where could you start? Here are some tips.
Start early on
Tracking your finances is a good practice even when you don’t have much going on. It is your way of detecting patterns and pre-empting problems. So you should begin as soon as possible. There are plenty of software solutions that could get you started, but if you’re not tech-savvy, you could just go with a spreadsheet or even a notepad.
Starting early on is an important step, but you also must ensure that you always update your log, table or system. For example, if you add a new regular payment, you will need to find where you will be able to come up with this money. Similarly, if you complete payments on a loan, for example, the available funds could help you save or invest.
Use tracking
Registering what you do is a great first step, but you must go further with tracking and analysing your spending and income. Again, it is not only about help you save as much as recognising opportunities for savings and investment.
Knowing you spending habits also could help you reduce unnecessary costs. For example, are you spending too much on gas? How about you plan to enrol in a loyalty program that could save you a bunch every month.
Do your grocery bills run higher than you have expected? Plan your shopping lists carefully and make sure you stick to them. Utilities are on the rise? Review energy-saving practices with your family members, and keep an eye on potential reduction of these expenses.
Learn to juggle
If you were used to pay credit cards immediately as you get the statement, you may want to continue to do that. But if you’re running tight on cash flow, more juggling may be required. Plan your payments carefully to make sure you don’t miss any, and you keep cash on hand for emergencies or anything else that must be paid in cash.
Keep an eye on due dates of your bills and payments. And know how to place new expenses on a credit card that has a later due date if you’re not expecting to catch up soon with your cash flow problems.
In some cases, you may even consider transferring your credit card balance to a new card that gives you a break on interest for several months. Although this is not a solution that can be applied often, it is one way to avoid paying interest or running really tight on cash, if needed.
All of these steps begin with understanding your situation in detail. So keep track of your expenses and income, and avoid rushing into a big purchase without knowing how you will be paying for it.
Improve your financial planning
Track your spending and income
Find patterns and eliminate problems
Manage your cash flow carefully
Consider ways to avoid paying interest
— R.O.
