The Internet is full of advice about the best ways to save, the amounts you should be saving, where you should be spending or investing, and a whole host of other financially related advice columns designed specifically to help you get in gear when it comes to your money. There are columns that tell you how to form good money habits, or what things you can change in your life to save yourself ‘£££s’. You’ve probably seen them all.
The thing is, how do you know if you’ve actually already got these great money habits or savings ideas down pat? How do you know if you’re already on the right track if no one is telling you that you are? If you can tick off all five of the below, then it’s a sure fire sign that you are well on the way to being in total financial control and should give yourself a little pat on the back!
1. You know exactly what’s in your bank at any given time
Most people have a pretty good idea of what they earn (and if they don’t, they should!) So at the beginning of the month, or week depending on how you’re paid, you probably know what is going into your bank account.
If you’re a level up, you will also have a good idea of exactly how much your bills and standing orders are going to be, meaning you know how much money you will have ‘extra’ a month to save, spend, play with, etc.
If you’re a real personal finance pro however, then you know what your bank balance is on a daily basis. Checking your bank balance every morning is probably second nature to you now, and keeping a running tally in your head; that £3.50 coffee on the way to work and £1.50 bus fare at lunch etc., mean that you have a really good knowledge of exactly how much you have in your bank at any one time, and exactly how much money you have to spend or save.
It’s a habit well worth having as it will keep you out of unintended overdrafts (and the fees they incur) as well as emergency ‘I have less cash than I thought and the rent is due’ situations.
2. You are not living paycheque to paycheque
A lot of us are, or have been at some time, struggling to get from one end of the month to the other without resorting to begging, borrowing, or stealing. It’s a tough job market out there at the moment, and the stagnation of ‘real’ take home pay is something that is affecting us all.
If you’ve got your finances down pat, however, it means you will likely have built yourself a robust and workable budget that you are able to stick to and live by. By doing this you’ll have built up a little ‘buffer’ amount of money that keeps you from the £0 line at the end of each month, and ensures that you’ll have enough put by to get you comfortably past payday without eating cold beans out of a tin.
Not only is this a great habit in terms of stress management and financial anxiety, but the extra money also gives you some flexibility of choice, be it going out with friends, buying something you need, or putting a little extra away in savings.
3. No payday loans!
In desperate times they’re an easy trap to fall into. This is especially true if (as mentioned above), you are struggling to make it to the end of the month and don’t have the money put by to pay for an emergency situation like a new car tyre or a washing machine repair.
Although the interest rates of payday loans were capped a few years, ensuring that repayment amounts could not exceed double than was borrowed, payday loans are a difficult debt spiral to get yourself out of once you are in them. If you have managed to get yourself out of your payday loan cycle, or managed to bypass them altogether, then you are making good financial choices!
4. The saving process is automatic
All the experts tell us that the moment we get paid we should put a certain amount straight into our savings accounts, no questions asked, no double takes, and no mid-month moments of weakness where you dip in to buy yourself a new dress.
This is easier said than done, as sometimes bills can be more expensive in some months more than others, or an event occurs in one month (like Christmas!) which means we need a little extra cash to get ourselves through.
However, if you’re an iron willed human who puts away your prearranged savings either immediately the day you are paid, or by a standing automatic transfer, and don’t touch them again, then give yourself a round of applause because this one single habit is perhaps one of the most important you can form when it comes to personal finances.
Learning to save money as a compulsory action, as opposed to an optional one will stand you in great stead in the future.
5. You’re saving in the right places
I’m talking pensions, emergency funds, and (if you’re crazy in control) investments. If you are ensuring that all your important savings bases are covered and are able to look into the far future and save without a specific goal in mind, such as a house or car, then yours is the world and everything that’s in it my son (or daughter). You are doing brilliantly.
Keep putting your savings into these important places and you will be absolutely fine.