You must have some excuses to avoid dealing with money problems. The most common excuses are that you are not as affluent as others, and it is not possible to consistently stash away money for a rainy day. When it comes to improving your relationship with money, you need to understand your financial position and your money habits.

Experts say that you cannot change your financial behaviour until you know what the issues are. Financial consultants can help you take control of your finances, but you cannot have sustainable control without identifying spending issues. In order to improve your relationship with money, you will have to put in effort on your own.

6 Ways to Improve Money Relationships

Here are the ways to help you improve your relationship with money:

• Understand your money behaviour

First off, you need to track your money behaviour. Bad habits do not pop into existence overnight. They may date back to your childhood when you started dealing with your pocket money. It might be possible that your parents never stopped you when you overspent, or they never set a good example of a good spender. You may be in a bad company that caused you to spend impulsively on multiple rounds of drinks and on gambling.

It is quite essential to know what exactly is the cause of money problems. Once you know what the problem is, you can easily come up with a solution. Acknowledging a problem can be challenging, especially if you resist it, but knowing how your relationship with money affects your overall financial condition and causes too many money problems will help you take responsibility. This will help you stop committing those mistakes again and again.

• Set your goals

Now that you have come to know the cause of money problems. The next step is to set goals. Goals that you set do not have to be so complicated that they demotivate you in the long run. First, you need to try to take it in your stride.

First, you should try setting short-term goals. For instance, if you figured out that your overspending is resulting in debt, your first priority should be tackling debt payments. Create a repayment plan.

• Maybe a debt avalanche or a debt snowball method will work for you.
• If you have multiple debts, you can consider consolidating them.
• You might have to improve your income and cut back on your expenses to be able to settle the debt.
• In order to save money on interest, you might think of refinance loans in Ireland.

Once you have paid off your debt, you can think of setting new goals, such as:

• Building an emergency cushion
• Contributing to your retirement account
• Savings for a down payment for your house or car

At the time of setting goals, make sure that you have the potential to achieve them. Short-term goals are easy to achieve. They will keep you motivated. When you build confidence in your ability to realise goals, you can think of setting both short-term and long-term savings goals. This is how your financial condition will improve a lot.

• Create a budget

In order to keep a tight rein on your money, you must create a budget. Budgeting will help you know how much money is going and where. Even though you are trying to turn over a new leaf, it does not mean that you will not slip up. In order to control that, you will need a functional budget.

You do not have to create a manual spreadsheet, as some expenses often go unaccounted for. This results in a mismatch between recorded expenses and spent money. You should rather use a budgeting app. You can link a budgeting app to your account.

Once it is linked, they will automatically fetch all transactions and record them in one place. However, you will have to make all transactions online or through your debit card. Transactions that you make through credit cards will have to be recorded manually.

Having recorded all transactions in one place will better understand you where your money is going. You can classify your expenses to know which category consumes the largest portion of your income.

This will help you come up with a plan to cut back on your spending. Prioritise necessities such as food, debt payments and utility bills. Fixed expenses will remain the same, but you can consider cutting down on variable expenses such as groceries, travel expenses and the like.

• Save money

You should start saving money. Saving is essential as it helps meet emergency expenses without relying on debt. You must have at least three months’ worth of living expenses. However, if you are on low wages, you might not be able to save that much money.

You should rather try to ensure consistent contribution. Even if it is small, it will help you have some money for a rainy day.

• Figure out how much you spend every month on average. The rest of the money should go straightaway to your savings account.
• Make sure that you pay yourself first.
• You should ensure that you do not spend a lot of money on non-essentials so you can stash away a considerable amount of money.

Having an emergency cushion is vital to prevent you from falling into debt.

• Invest

You should think about investing money as well. Wages do not rise proportionately to the cost of living. In order to fight against the soaring inflation, investing is essential. You do not have to have a large amount of money to start your investment portfolio. Consider short-term investing methods.

• You should try to invest in shares and mutual funds.
• Consider buying fixed deposits.
• Consider investing in REITs.
• Start contributing to your pension.

Investing is crucial to increase the value of your money.

• Build good habits

Saving, investing and budgeting are good habits. Make sure that you stick to these habits as they will help you be in control of your money.

You should set a spending limit for each category. This will preclude you from overspending. Make sure that you always take care of essential expenses.

The bottom line

To improve your relationship with money, you will have to identify the cause of money problems. Then, you will need to create a plan that helps you deal with those challenges.

In addition, you should create a budget, set aside money for a rainy day, start investing money, and set realistic goals. Adhere to these good habits, and over time, you will see a drastic improvement in your financial condition.