When you first start earning money, or get a big promotion, it is exciting to be able to spend money that you didn’t have before. And part of Moneyworks philosophy is that you should always celebrate. But it is important to know when to stop celebrating and get back on track to achieving your goals.
Controlling spending doesn’t mean never spending. But it means being aware of how much you are spending and on what. Of course you should have luxuries and even the odd vice or two, but if you really do want to have control over your finances, you should set rules for yourself about how much you can spend on those vices and luxuries.
One of the best ways of controlling your spending (and a number of our clients do this), is to have different ‘jam jars’ – well actually, bank accounts for different reasons. Now that there are bank accounts with no monthly fees available – this is a very achievable solution.
Put aside a certain amount each pay for travel, or for a particular goal. If you have to ‘raid’ that account, it means that you don’t have the balance of spending quite right yet, or if it really is an emergency, try and replace the money as soon as possible.
Eliminating high interest debt should be the first step when you are developing your financial plan. You should not owe any money on your credit cards past the due date. The high interest rates that are charged can keep you in a cycle of having no money, if you don’t repay the balance in full each month.
Borrowing money on high purchase to buy a vehicle or TV is also a trap. The best way to buy new things is to save up until you can afford to purchase the item. But if that is not possible, look around for interest free cards and finance.
Make sure that you read the fine print, once the interest free period ends, you could end up paying very high interest rates, so make sure that you repay the loan before the interest free period ends.