Tips to get a grip of your finances and maximise your earnings in 2023

They say money can't buy you happiness but believe you me, it helps. Back in my heydays, there were just so many temptations in my life that it was just so hard to save. Now I am now older and hopefully wiser, I am learning and still learning to use my money strategically.

There is this bad misconception that millenniums are the only ones that have bad money habits, as they are too young to know better or have acquired student debt.  However, at work, I was puzzled just how a lot of people in their 30s and 40s always groaned or spoke aloud in delight when payday approached because they could hardly afford lunch and were broke.

Being in debt or dead broke can really hold you back from doing what you want to do in life. Here are some tips that have helped me get a grip of my finances and could help you on your way to a debt free existence and financial security*. This is mostly relevant for ladies that live in the UK and US.

Analyse and tackle your debt: 
How much debt you really have will involve accumulating debts such as mortgages, car lease payments, credit cars etc.  It will be wise to invest in a simple financial journal, where you can list your debts and any savings. There are many online tools that can help.

New research, by the Harvard Business Review, states that the best way to tackle your debt is to eliminate your smallest debt first. This is called "the Snowball Effect". For instance, let's say that your smallest debt is £50 on a credit card.  The best way to tackle it is to pay it off before tackling other huge debts. If the minimum interest rate you pay on your card is £10, then the advice is to pay a little more. In this way, you will be able to eliminate small chucks of your debt and be motivated to continue paying your debt off.  After the card is paid off, it is important to keep the momentum up and pay the next smallest debt. Here is a free Snowball Effect Tool that can help you.

Monitor your spending:
Get an insight on how much you are spending. There are now many apps on the market that allow you to budget and tell you if you are going over a certain limit. They also empower you to set and achieve your financial goals. You can start with your bank app but try others to give you a more holistic approach. The apps you decide will usually be based on where you live in the world. In the US, there are Clarity, You Need A Budget and Mint. In the UK, there are Money Dashboard, Chip, Monzo, Wally and others. You will be surprised how much you spend on random things.

Check your credit report and score:
Credit scores impact your ability to get a loan, car mortgage and job. The good news if you live in the United States is that you can get your credit score for free each year from the three agencies. It can only be done once, so you need to print it out or save it. If you have a poor score, another option may be to use an app called Credit Karma. It gives you tips on ways to improve your spending patterns. 

In the United Kingdom, you can get a statutory report from Equifax or Experian for £2. It can be done online or by post. Within your statutory rights, you can dispute inaccurate information on your credit file and have errors corrected within 28 days.

Switch to 0% credit card:
Shop around for a credit card that has a 0% interest period, and you can transfer your debt.  For years, I could only afford to pay the minimum payment and there was no difference in my debt year round. When I got this I have to say I saw the light at the end of the tunnel as I was able to save £900 in interest on one of my credit cards.

Shop around and switch:
It is puzzling just how many people just stick to the same supplier and do not shop around.  There are many websites that offer the chance to compare services such as utilities, car and home insurance etc.
My home insurance provider sent me a renewal bill with a significant increase even though I had not claimed and had a no claims' bonus. I went to a compare site, got a favourable quote with another company, and I switched. It has saved my household hundreds of Pounds.

Develop an emergency fund.

Sometimes it is impossible to save due to emergencies creeping up unexpectedly. Dave Ramsey states that everyone needs to set aside an emergency fund, for those events that you cannot plan for. This money should not be used for anything else but for its main use, so to avoid temptation, use an account that you use or open an e-account with your bank. No matter how crappy the interest rates are, it will just sit there for that eventuality.

Here is one interesting formula that I saw on the net, which I put my spin on, that could start you on your way to an emergency fund. 

For instance: Assume that you want to set aside £500 for an emergency fund. You start today by setting £1, tomorrow £2, day after tomorrow £3 and so forth.... By the end of 40 days, you would have saved £465. Some people will not have the patience for this, so there is another approach where you apply the technique above but on a weekly basis for the whole year.

To make up the rest of the money, you could have a spring-clean out and sell your stuff on eBay or utilise your tax refund. 

Invest your money wisely:
Whoever coined the phrase that "knowledge is "power is a wise person. There are so many investment books and magazines out there for beginners. However, one that I would recommend for the first time investor in the UK is Moneywise Magazine. There are tips from investment to pensions, and subscribing to them will keep you informed on any new regulations that could impact your finances. The information is priceless and if you are over 40 and yet to save for retirement, this could be your holy grail. It's not too late to start. There are also various investing platforms such as Moneyfarm which are worth looking into.

In the US, I recommend reading or checking out tips from financial expert, Dave Ramsey and Betterment, the US alternative to Money farm.

Not saving for retirement, START:
In the UK, we are currently blessed to have a system where everyone is entitled to a state pension, provided they have worked for 10 years or more.  With the uncertainty of Brexit, it's time to get a private workplace pension in place. Employers are now required by law to give you the option of private pension, so if your employer does not offer one, then ask.  It will be taken out of your monthly salary, so there would be no temptations to spend. If you are like me that have had different jobs, then utilise pension apps such as Pension Bee, which will assist.

In the US, you should take advantage of the Roth IRA. A Roth IRA is a retirement account that you fund with post-tax income, and all future withdrawals that follow Roth IRA regulations are tax-free. Remember there are income restrictions and the minimum you can contribute each year is $5500 or $6500 if you are over 50, but there are so many benefits to this account which go way beyond retirement. 

Get another job or a side Hustle: 
We are sometimes tempted to put that big purchase on our credit cards and start accumulating interest. Not a good idea. Credit cards should really only be used as a plan B. We all have a talent and with the advent of the Internet why not put it to good use. You could be a mentor, teach online, sell your fashion designs, art, photography etc, develop apps to help other people, be a blogger and give advice on something that you are familiar with. If your current income isn't cutting it for your lifestyle no matter what , it is also worth looking at getting another job and negotiating your salary.

Next time
Zina

*Disclaimer: I am no financial expert. These are just tips that helped me with my debt and may not work with everyone. 
If you need more professional help, there are debt agencies or financial expert that can assist you. Ask your local CAB.