If you’re overwhelmed by the thought of your finances, chances are you don’t feel confident about what you’re doing or know what you’re supposed to do. That in turn could mean you’re not doing anything at all to get your finances under control.

You’re not alone if, when you hear ‘start making better money choices’, you wonder ‘But what does that even mean?’

It starts with your attitude. You need to want to make better choices, so that managing your money well is a cause for celebration, not a frustrating chore. Once you’ve made that commitment, there are practical steps you can take that will make you consider better money choices every time you spend, borrow or invest. We’ve got 4 tips that can help you get on the right path:

1. Track where your money goes

You can make the right decisions only if you’re working with the right information. With your personal and household finances, that means knowing what you’re spending your money on and how much of it you’re putting away for the future. So, first prepare a budget that lists all your monthly income streams, and all your monthly expenses.

This can be a sobering exercise if you’ve never looked closely at where your money goes. But it’s a very valuable lesson that will help you see how you can make better money choices.

One of the handiest tools you can use to start tracking your spending is MoneyTracker, which you’ll find on the Nedbank Money app.

This is a digital tool that syncs with your transaction history so that you can see how you’re spending your money. You can allocate transactions manually in your budget or let the system’s artificial intelligence do that for you. It’s the perfect way to help you spend and save smartly.

You should also consider how interest and fees are charged on different accounts (the interest rate on your overdraft versus that on your credit card, for example), so that you can use your different financial tools more cost-effectively. Did you know, for instance, that there are times when it makes sense to use your credit card to make a purchase? Or are you aware of all the times you shouldn’t use a credit card, like when you’re drawing cash?

2. Be a responsible borrower and monitor your credit score

Once you know how you’re spending your money, you can then start changing habits to favour saving over spending.

It’s difficult to put aside money for the future if you’re already using most of your income every month on short-term debt like a loan, credit card or store card. So, one of your first priorities might be to reduce this debt so that you can use that money for saving and investing instead.

Credit in all its many forms is a very useful financial tool for life’s necessities. But tools must be used responsibly. You should use credit to make your life better, and that starts with keeping an eye on your credit score. Several factors influence your credit score, including how much debt you have and how well you manage it. Being prepared for unexpected demands on your cash flow is always a better money choice, and that means keeping your credit score at a level where you qualify for credit whenever you need it. A better credit score can also get you better interest rates on credit.

Maintaining your credit score is part of being a responsible borrower, and it starts with paying your instalments on time and in full. It’s easier if you set up debit orders for all your payments every month. 

3. Insure your assets against risks

It definitely pays to have insurance on your life, your car, your home and its contents, and your health. Insurance cover protects you against financial calamity should something happen beyond your control. If you have the right products offering the right cover, you could avoid a serious financial setback.

How would you keep up payments on your car if it were written off in an accident, or if your house were to damage in a freak storm? Insurance promotes your long-term financial well-being because in the event of a sudden disaster, it means you won’t have to go into debt to cover any shortfalls.

4. Save for tomorrow

A major part of making better money choices is to prepare for tomorrow by saving today. This means saving not only for your retirement, but also for unforeseen emergencies. Sure, it’s easy to use credit sometimes, but is it the smart choice? Not always. A better money choice would be to stay prepared. Have money set aside that you can use to cover any emergencies.

How much should you save? As much as you possibly can. Think of it this way: Even if it’s only R100 a month and at the end of the year you have some emergency, then your headache will be R1,200 smaller than it would have been.

You also need to save for your retirement. You might belong to a company pension fund that deducts a certain percentage of your salary every month, or you could manage your own retirement savings. 

These are all long-term savings that you should leave untouched because you’ll need these reserves to live on once you’ve retired. And bear in mind that many people are now living to 90 and beyond, so your savings will need to last longer than previous generations’.

These tips should help you overcome any fears you have about taking control of your finances. It’s better to tackle those money demons instead of being ruled by them. Only you have the power to make these changes. Do that today and you’ll have all your tomorrows to enjoy living, rather than constantly stressing about money.