A guide to financial wellness through managing your money

15/04/2019

Each new day is an opportunity to make another (better) financial decision. And if you want financial wellness for yourself, the best decision you can make is to start managing your money better. This means being mindful of how to start saving money in every area of your life and keeping an eye on how you spend.

To be successful at managing your money, you need a clear understanding of your current financial picture so that you can make meaningful changes to your relationship with money. We unpack some of those changes in this blog.

Know where your money goes

Managing money starts with knowing where your money is going. This includes going through your bank statements to look at your spending and see where you can save money. Your bank statements are a great reflection of your financial habits.

Household expenses is another area that can give you a picture of your spending. Pay close attention to your monthly water and electricity bill, for example. Being mindful of your electricity usage is one of the easy ways to save money.

Set goals

Getting to financial wellness starts with managing your money. That, in turn, starts with a goal. Ask yourself one important question: what does financial wellness look like to you? The answer could be anything from being able to afford the things you want, to being debt free, to having multiple streams of income.

Think about what you want and why you want it. Then give yourself time frames, and prioritise your goals either by order of importance, or by terms (short or long term). The next step is to start budgeting towards achieving your goals.

Prioritise budgeting

Budgeting is something many people know about, yet don’t do or put off doing. And those who budget sometimes struggle with sticking to the budget somewhere in the month. For your budget to work, you need to be honest with yourself. Most importantly, you need to be disciplined.

There’s one simple rule that’s great at helping organise finances: The 50/20/30 rule. This rule breaks down your budget by reserving 50% of it for fixed expenses, 20% for savings and investments and 30% for any additional costs (petrol, groceries etc.). Read more about 50/20/30 Rule for Budgeting.

For this rule to work, you need to stick to the limits that you set for yourself. A big part of sticking to your limits is being able to distinguish between a want and a need. Just because you don’t need something doesn’t mean you can’t buy it — as long as you manage your budget prudently, you will be able to indulge yourself now and then.

Another way to manage your money, which is also a method of budgeting, is called ‘Pay Yourself First’. Often referred to as reverse budgeting, this is a great option if you’re wanting to prioritise saving.

Pay yourself first

This is a method of budgeting that prioritises saving before your living expenses. If you want to grow your savings habit but find yourself having little to no money left after paying and buying everything else, then this proactive budget approach is for you.

With this approach, you build your budget around savings goals like retirement, emergency fund, etc. instead of your monthly expenses. Paying yourself first works hand-in-hand with a savings account that will grow your savings. This means you should consider high interest savings accounts. When shopping for the best savings option, you would ideally need to compare interest rates, which can sound complicated for many. These are the terms you need to know when comparing interest rates.

The way you manage your finances will dictate the direction your finances take, either towards or away from financial wellness. To be successful at it, you need an understanding of your current financial picture, as well as your future financial wellness goals. The important thing is to start, monitor your progress and celebrate each milestone along your journey to financial wellness.

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