Your Money, Your Rules - Taking Control of Your Finances

Lessons from the Wealthy on Money Management 

AD. Statesman & philosopher Edmund Burke once said, “If we command our wealth, we shall be rich and free. If our wealth commands us, we are poor indeed.” 

Taking control of your money is as important as earning it. No one starts rich unless you were born with a silver spoon. That said, billionaires don’t get where they are by chance. There are valuable financial lessons to learn from their habits and philosophies. That’s why, if you want to manage your money and finances wisely, you need to study the strategies of people who’ve already made it.

A common thread between most of their rags-to-riches stories is that they lived fairly simple lives and had humble beginnings. They didn’t lose their love for simplicity or frugality when they got rich. For example, Apple Inc founder Steve Jobs was known for his minimalist approach, he didn’t believe in the ostentatious display of wealth despite his net worth being well over $10 billion. He was famous for wearing black turtlenecks & jeans, a staple in his wardrobe; simply because he didn’t like wasting his time or money on making fashion choices. It was one less thing to worry about.

Closer home, millionaires like Marcus White live off £1000 per month. He claims to live on the bare minimum and continues to live frugally despite owning over £2 million in assets. He isn’t particularly fond of consumerism, which is often reflected in his sustainable choices. Be it home-growing his vegetable produce, or recycling/upcycling where possible. He credits his financial well-being to living frugally and sticking to a budget. A practice he’s been living by since his early 20s. Good habits do indeed start early!

Both of these examples demonstrate a dislike for wastefulness and excess. Living sustainably and minimally has been a key feature of their stories. 

Today, the average UK household has a debt of £65,665, which tells us a lot about the financial health of the common man.

That’s why, to help you take better control of your finances, we bring you this article exploring how you can navigate through the current cost-of-living crisis and tackle debt effectively. 

_{[Photo by Mikhail Nilov]}

1. We Should Be Controlling Our Money 

We’re often complaining about not having enough money. Our expenses keep increasing, and our savings keep decreasing. Yet if we dig deeper, it just means we don’t have a grip on our money. It’s controlling us rather than the other way around.

If we learn how to make our money work for us, we could do with far less than we think we need. It starts with good financial habits and effective management of our resources.

Assessing what you spend your money on is a good starting point when looking through your spending. Your value system comes into play based on where you spend your money the most. 

For example, a person who chooses to spend money on clothing made from organic materials or buys from thrift stores is making an active choice to consume sustainably. You could infer from their purchase that they care about their environmental impact.

Likewise, someone who prefers donating their bonus to a charitable cause shows their commitment to community welfare. Volunteering, philanthropy or supporting local businesses shows that they’re empathetic to the societal challenges surrounding them.  

So what do you value? What should your hard-earned pounds be spent on? Is there a way to make better choices? How do you go about tackling your finances?

2. Budgeting for Financial Well-Being

Setting a budget is the golden rule. 

But before you begin, take a good, hard look at your income sources, debts and investments. It’s not enough to set a standard budget; the key is to create a reasonable & realistic one that suits your financial situation. Once you do that, you can set forth your financial goals. This may be an emergency fund, education, an international holiday, or early retirement.

We must learn to prioritise these financial goals as well. Many of these could be classified into long-term and short-term goals. This will determine how much you save for which goal and the time you need to achieve it. For example, if you’re saving for a foreign holiday next year, you have some time to stretch. You could safely put aside a little every month without worrying about burning a hole in your pocket.

A short-term financial goal like paying for medical tests scheduled for sometime in the next 3 months would require a different approach. Since your time frame to attain this goal is short, it’d mean setting aside a larger amount.  

A simple way to manage budgeting tasks is to use mobile budgeting apps like Monzo and Chip. It’ll help streamline your budget and track your progress.

Don’t forget to celebrate the little milestones when you achieve them!

3. Tackling Debt & Having a Healthy Credit Score

Most of us are overwhelmed with mortgages, credit card bills, and outstanding payments. However, having debt & a healthy credit score don’t go hand-in-hand.

It’s not all grim, though. With enough financial prudence, you can improve your credit score and reduce debts. It's not rocket science, but it does require discipline. The key is to employ financial management principles effectively. Remember that debt reduction is the priority. This will automatically reflect in your credit score, thereby improving it.

The simplest strategy is to tackle debts with the highest interest rates. Or, eliminate the ones that require the smallest outstanding payments.

If you have outstanding debt from a previous loan, you may still qualify for a second loan. Often called a debt consolidation loan, it doesn’t differ greatly from a personal loan. While debt consolidation loans are specifically designed to tackle debts, personal loans are used for various purposes like home repairs, holidays, etc.

Personal loans come with much lower interest rates and can help you eliminate your debt faster by reducing the amount paid in interest over the loan period. Irrespective of whether you take a debt consolidation loan or a personal loan, it’ll help save a few pounds. On top of that, you also get to improve your credit score while repaying your debt - a double win!

This is particularly effective in dealing with debts with high interest payments. The key is to remember to make your payments regularly since missed payments often reflect negatively on your credit history.

Conclusion

Financial wisdom doesn’t arrive overnight. As with all things that take time, the rewards are indeed sweeter. We must consider training our minds to see opportunities to save. Stick to a budget and enjoy the small wins. 

The simple steps outlined in this article, when executed diligently can help you become debt-free. You’ll be able to tackle your finances better, be at peace and be on top of your finances. Your hard-earned money deserves the wisest handling. So take that first step to financial freedom today!