The holiday season is well and truly here and many of us are thinking about travel, presents, and plans for 2025. Yet it’s no secret that despite trying to make the most of the festive period, many of us continue to hide money worries. One in three Brits say that financial stress has an impact on their mental health and globally, six in ten people are worried about their financial future.
It needn’t be that way.
Despite the fact that factors such as inflation and interest rates are outside our immediate control, there are things that are within our control, and though financial matters are more tangible than emotions, our emotions play a huge role in our relationship with money – and so does a sense of control over what’s going on.
With that in mind, here are some simple steps to get your finances in order.
1. TAKE STOCK OF WHAT YOU HAVE
Having insufficient money is one thing, and not knowing your incomings and outgoings is another.
While digital banking and frictionless journeys are great for financial inclusion and ease of spending, the ease also results in people having too many accounts and little idea of what’s inside those accounts!
According to one study, a UK adult has about 2.1 to 2.4 accounts. And I’m only counting current accounts, not the buy now, pay later options, investments, etc.
While there’s no single correct number of accounts to have, and many of us have moved on from the concept of a primary bank account, you must know what account serves you what purpose.
So the first thing to do is to take stock of all your accounts, cards, etc, and check what’s inside them, so that you know where you stand – what you own and what you owe.
2. CLOSE WHAT YOU DON’T NEED
It’s a well-established fact that clutter causes stress. This applies to finances just as much as it does to your life. So once you’ve taken stock, consolidate as much as you can, and close what you don’t need.
Often when I’m coaching my clients, we find that their finances are extremely spread out and a huge cause of stress, and we begin just by sorting and decluttering.
All those credit cards you haven’t used in years.
Close them.
All those subscriptions you have no plans to use.
Close them.
When you do that, you’re able to see clearly where you stand.
3. SET A GOAL
Next up, ask yourself what exactly are you looking for?
As we know, money has no intrinsic value. It’s either a medium of exchange, or a store of value.
What is it to you in relation to your goal?
For example, are you saving up for an event, such as a wedding, or are you working towards financial freedom?
Whatever the case, being clear on your goal will help you decide the next best action.
For example, if you only have $20,000 in savings and need to put down $40,000 to get on the property ladder, then you know the gap you need to plug.
4. CREATE A BUDGET
I understand that many of us hate budgeting! I get it.
No matter how much fun we try to make it sound, there’s a sense of deprivation associated with budgeting as it makes you feel like you’re going to have to cut down on the little joys of life. A study by CNBC shows that over 40% of Americansdon’t budget, albeit, Gen Z seem to be better at it than baby boomers.
Yet even if you continue to spend as you do, having a budget gives you a sense of control.
For example, if you’ve set aside $200 to eat out each month, you can go out and enjoy your meals without feeling guilty about spending, because you know that it’s already baked into your plans.
Or if you’re definitely saving for that house and need the additional $20,000 to be able to afford it, then you know how long it’ll take you to get there and can consider levers such as borrowing from your parents, sharing your rented flat for a while, and other such ideas so that you can get there sooner.
Needless to say, you can always use technology to simplify and automate all of the above. You could link accounts via open banking, use budgeting apps, cash flow analysis, create pots to manage your spend, etc. For subscriptions, you can also try apps such as Bobby and Subby. Even if these options aren’t available to you, a simple spreadsheet is a good start.
CONCLUSION
Financial stress is a key driver of stress in life. It not only affects your own wellbeing but can also put a strain on your relationships at home and at work.
Often this stress has less to do with how much you earn and spend and more to do with how well you understand yourself and your finances.
So for what it’s worth, make the time to get your finances in order – and keep it that way.
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