In this edition of the magazine we asked our regular Money Matters contributor Robert MacDonald his thoughts and views on a subject that is often overlooked simply because of the pace of life.
Good money management is about more than just being able to afford the essentials. It’s about being able to cope with the unexpected and grow your wealth.
If you’re concerned about your money management skills, the tips below might help you figure out what you’re doing wrong and how to fix it.
Signs You Have Poor Money Management Skills:
1. You always have a balance on your Credit Card
Everyone should know by now that credit cards are one of the most expensive forms of debt. Carrying a balance from month to month, and paying interest, is an easy way to throw your money away.
Some people get hooked on credit cards is because they are chasing points for rewards like flights, gift cards and cash back. But if you’re paying any sort of interest on those cards, then the numbers just don’t stack up.
The fix: If you do regularly carry a balance, look to consolidate it to a no-frills, low-rate credit card — and then focus on paying it off.
2. You’re constantly getting late fines and Overdraft Fees
If you are regularly getting hit with late penalties and overdraft fees, it’s a sign you aren’t in control of your money. Perhaps you let the bills sit on the kitchen table unopened. Or you don’t check your bank account balance before going on a shopping spree and accidentally overspend, getting hit with an overdraft penalty.
These fees and penalties are such a waste of money, because you get no benefit from the payment.
The fix: Have a system whereby you open and schedule bills and other payments as soon as you receive them. And check your balance before you head out, so you know how much you can spend.
3. You Aren’t Saving for the Future
Sure it’s nice to treat yourself with your hard-earned money today, but if you aren’t putting away even a little bit of your earnings for the future, then you’re going to have a very boring retirement.
With many Scots not saving nearly enough for their retirement, this is a money management issue that can have serious long-term consequences.
The good news is you don’t need to put away massive amounts of your income now. The power of compounding interest means that even a small amount saved today can equal thousands in the future.
The fix: Start researching the best retirement option for your finances, then direct a portion of your income to that account — even a small amount will mean a more secure retirement.
4. You Don’t Have Emergency Savings
Unfortunately, emergencies happen all the time. If you don’t have a bit of cash saved away for those out-of-the-blue events then you’ll be left relying on credit – or worse, unable to pay your bills.
Having savings set aside also gives you freedom. Can’t stand your flatmate? You’ve got the funds to move out and find your own place. Boss giving you grief? An emergency fund will tide you over while you change jobs.
The fix: Set aside a set amount each month and pay into a high-interest, online-only account. You want to make it hard for you to access your money frequently, but relatively easy to get at in a hurry.
5. You Don’t Know Where Your Money Is Going
Does this sound familiar? Your salary deposited into your bank account, you pay a few bills that are due, visit the ATM for some cash, go to the ATM again and buy that top that’s just gone on sale. Then it’s two days before payday and there’s £5 in your account. Where’d it all go?
Without a good idea of where your money is going, all of your other financial goals are that much harder to meet. If you’re constantly short of cash, then you’re more likely to use your credit card. And then you’re just that much more behind next month.
The fix: Start making it a habit to look at your bank statement every week and consider how each purchase. By looking at your account each week, you’ll start to see patterns in your spending and become more aware of where your money black holes are. And that’s the first step to turning your bad money habits around.