1. Designate Bank Accounts
Simple really. An instant way to improve your regular cash flow is to split your money between at least two separate bank accounts. You’ll need one account where income is paid in and bills are paid out. Regular savings should also be set up from this account.
You should then have a second account for spending money. This way, you won’t have that lingering doubt on whether there is enough money left in your account to pay your bills – you’ll have worked out what you need for this (and savings) and the rest is yours to spend.
Splitting this between two accounts makes a huge difference to your psychology; you’ll soon find it incredibly easy to live on the money in your spending account (and still have fun).
2. Avoid Contactless Payments
Contactless is great in principle, but it will be your worst enemy if you struggle to keep on top of your spending. The pure convenience of it makes it so easy to lose track of what you’re buying and before you know it, you’ve blown £100 without even realising. It makes your money intangible and you forget the pain of spending.
You’ll be a lot more watchful of your wallet if you have £100 in cash as opposed to the seemingly unlimited supply of money on the plastic.
3. Delay Gratification
Seen something you like? Does it cost a lot of money? Do you want it so badly the price doesn’t matter? Why not wait for a week or two before committing to the purchase? If you still want to buy it after a couple of weeks’ consideration – you’ll know it’s something you truly desire and it will be worth the wait.
Don’t act on impulse. How many times have you bought something on a spur of the moment only to regret / forget about it after a few months, weeks or even days? Sure, you work hard, you deserve to be rewarded – but next time you want to spend your hard-earned cash on a whim, just try delaying the commitment to buy. You may find that after a week or so, your no longer interested – even though you were so convinced before. You’ll also save the money for something else you really want.
4. Cash is King
The old chestnut. If you want to work on your budgeting and improve your cash flow, pay for things with cash rather than card(s).
Let’s assume you’re paid monthly. Figure out how much you have left as ‘spending money’ after all bills are accounted for, and designate it to your ‘spending account’. Then, why not add another layer of spending security. Divide the figure by four and withdraw your weekly spending money as cash. This is what you have to spend for the week – once it’s gone it’s gone, until your next weekly withdrawal is due. Be disciplined with this and you’ll never overspend.
5. Create a budgeting spreadsheet
Once you’ve got your income and expenditure written down, you can really start to get a grip on your regular cash flow.
Hopefully, you’ll know how much net income you have coming into the household each month. Write this number down and simply split your regular expenses into categories.
Then, take the total away from your net income. It couldn’t be simpler, yet visualising your income and expenditure can make a huge difference to how you start to think about your money. See the below as an example:
This is an essential tool to help with everyday money management.
6. Only spend it if you have it
Seems obvious enough, yet it’s so easy to fall into the credit trap. Part of our psychology is that we struggle to relate with our future selves. Guess what, you will still be you in the future – your present actions will simply shape what that feels like. This applies heavily when we pay for stuff using credit cards or loans.
We get an instant surge of happiness and enjoyment from a credit purchase – thrilled with the fact that we’ve acquired something without having to pay for it upfront. A year or two down the line however, when we’re bored with whatever we bought in the past but are still paying for it, this can have quite a damaging impact on our relationship with money.
It’s also very easy to keep using a credit card, even when you know you shouldn’t, and before long you can run up sizeable debt without having anything tangible to show for it. If you want to buy something, go ahead and buy it – just make sure you can afford it first. If you can’t, well…. don’t buy it.
7. Think about growing income rather than trimming expenses
Your outgoings are what they are because that’s what it costs to live your life. Once you’ve reached a point where your outgoings cover the lifestyle you want, keep them there – there’s no point being miserable just to save a few quid.
Instead, focus your energy on increasing your earning potential. Think about what you can do to increase your income and allow those thoughts to manifest in your mind. It’s amazing what can be achieved just by thinking about it. This also creates a positive mindset and ultimately a happier existence.
Instead of cutting back on the things you enjoy in life, focus on increasing your income so you can enjoy even more.