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Taking control of your finances

This blog was written for us by Laura Whateley, author of The Sunday Times bestseller Money: A User’s Guide

“Oh, I’m so rubbish with money”. It’s a phrase I’ve heard a lot in the past year, since I wrote a book – Money: a user’s guide – detailing all the things I wish I’d known about personal finance ten years ago but was often too embarrassed to ask.

I used to think I was one of those people who is destined to not be on top of their finances, but I’ve come to realise that this is a fairly universal feeling. We didn’t learn about personal finance at school, and we’ve grown up with money being a subject that’s impolite to discuss. Yet there are increasing demands on our cash, especially for those under 40, from extortionate housing costs to how to save for a pension while paying off student loans.

The easiest thing is to stick our fingers in our ears and worry about money later, but here’s the thing, that is only going to make the problem feel more out of control.

There’s growing evidence about the toxic link between money and mental health. The excellent charity, the Money and Mental Health Policy Institute, suggests that if you have a mental health condition such as depression or anxiety, you are three and a half times more likely to be in debt. If you struggle with money and debt to begin with, though, it can lead you to struggling with mental health problems, with financial worries being a big source of distress.

Money is often presented as a topic that is for those who have plenty of it, or something that is accessible only if you are great with numbers and spreadsheets. It’s easy to feel that you will always have a negative relationship with your bank account. But I like to think of it as like food or exercise. Being “bad” with money, like being bad with getting to the gym, or being bad at eating vegetables, is not a personality trait, or a permanent state of affairs, if you don’t allow it to be. You can improve your finances and develop a healthier relationship with money just by deciding you want to.

Here are a few ideas on where to start:

Engage with your own money

Actually look at your bank balance, even if it’s painful, and monitor what is going in and out of your account. Ignoring how much money you do or don’t have is not going to get you any more of it -believe me I’ve tried.

It’s much easier to do this now with banks and apps that let you monitor and categorise your spending on your phone. Consider having a money detox for a week or two, the most effective way is to try a month of only spending on absolute essentials – rent, basic food, transport. It will help to flush out where you are spending without really thinking about it, what you could cut back on and what you actually want to do with your money.

If a whole month is too tough, you could try a more ongoing 5:2 money detox approach where you avoid spending altogether for two days a week, apart from on essential bills.

Don’t ignore expensive debt

Tackle debt head on. It might be counterintuitive but stop saving until you have paid off any expensive bank debts. That does not include student loans, which operate more like a graduate tax, or mortgages, but if you are chipping away at minimum credit card payments you will be paying very high interest rates compared to those on even the best savings accounts.

You could always look at options such as debt consolidation. There are services and charities that will help you to do this for free, for example debt charity StepChange can help you put a plan in place.

Plan your savings

If you struggle to save, give some time to thinking about what it is you want to save for and whether you can afford to save that much based on your income and essential outgoings. It is easy to be overambitious and then feel defeated if you can’t continue to put as much as you hoped to one side.

Once you’ve worked out a realistic sum, take it out of your account as soon as you are paid and move it somewhere you can’t touch it for a while. If you wait until the end of the month to save, there won’t be anything left.

Loyalty isn’t key for broadband and utility providers so shop around!

Try to understand all your bills. We waste so much money by ignoring how much we spend on energy, insurance, or, the worst, mobile phones. Unless you switch up your utility providers regularly I can guarantee you will over pay, companies make a lot of money from customer inertia. If you are on a mobile phone contract with a “free” mobile, changeover to an almost-always cheaper SIM-only deal.

Don’t be afraid to talk about money

Become more comfortable discussing money with friends, family and colleagues. We are all so cagey about how much we earn, or where we like to spend, or what we do or don’t do with our savings or lack thereof for fear of being judged by others, but we all have blind spots or things we don’t understand about personal finance. It’s surprising what you can learn by discussing your own situation with peers – it’s reassuring to hear that other people feel worried about overspending or how much they are earning, too.

These are simple first steps, but they immediately make you feel more in control of your finances. Feeling in control makes all the difference to our relationship with money. We all have our vices, whether it’s splurging on making your home look great or taking that much needed holiday, I bet you will be much more likely to feel that, actually, you’re not so bad with money, after all.

This blog follows a recent event that Zopa hosted where Laura Whateley discussed her Sunday Times bestselling book, Money: A User’s Guide, for the members of Rebel Book Club.