Write down your income and expenses and create a budget for yourself
When you want to take a closer look at your personal finances, the first thing you should do is to write down all your income and expenses. This allows you to define your everyday budget.
Income may consist of e.g.:
- rental income
Expenses may consist of e.g.:
- food and drink
- groceries and medicines
- loans and instalments
- housing costs (including rent, maintenance charge, heating, water, electricity and waste management fees)
- insurance premiums
- internet or telephone subscriptions and streaming services
- travel expenses (e.g. car expenses, bus tickets, taxi fares)
- appliances (including household appliances, telephones and computers)
- furniture and interior decoration
- health and beauty products and services
- holidays and other leisure expenses
Once you have recorded all your income and expenses, you can get a clear picture of the overall state of your finances. You will be able to see if you are spending too much money on a certain area of your budget, and can consider different ways to improve the current situation. It might be possible to save on housing costs, for example. If your current apartment is not essential to you due to living comfort, location or other similar factors, changing apartments may be a good opportunity to save money.
Creating a budget will also help you to plan your future savings. By cutting costs, you can save more money. Once you know how much money you are able to set aside every month, you can incorporate regular savings into your budget. In addition to this, having a concrete goal towards which you are setting money aside every month makes it easier to really commit to saving.
Take full advantage of savings accounts
Nowadays, many banks offer so-called online piggy banks. Practically speaking, an online piggy bank is a separate current account. The catch is that whenever a customer uses their payment card, a certain amount of money, like 0.50 or 5 euros, is transferred to their piggy bank. Customers are able to define the amount themselves.
For example, if you set the sum at 1 euro and use your payment card once a day for a month, you will save 30 euros.
Banks also offer customers a possibility to invest the money deposited in the online piggy bank directly in one of the funds the bank offers.
Choose the best subscription deal
You should regularly check if there are better deals available on your electricity contract, phone or internet subscriptions and insurance contracts. The prices may vary significantly between different service providers. For example, if your energy consumption is on the lower side, you may be able to obtain a very affordable monthly contract. You may also be able to get better contracts if you can handle a slightly slower internet connection or can make do with fewer minutes on your calling plan.
Choosing the right insurance can also save you a lot of money. Consider if you really need all the insurances that are being marketed for you, or if you could instead acquire a suitable insurance package from another provider for a lower monthly fee.
Cut down on unnecessary spending
Stop buying impulsively, and consider the need for each larger purchase carefully and on a case-by-case basis.
Is it truly necessary that your new washing machine has a Bluetooth connection, and are you willing to pay extra for it? Do you really need the latest smart watch, or would a cheaper device with a heart rate monitoring feature and fewer extra functions be enough? Is it necessary to buy a new bag right now? Do you specifically want to buy an ice cream cone from the nearby stand, or should you buy the three times cheaper option available at the grocery store?
Unnecessary spending also includes having to constantly buy new items or devices because the old ones keep breaking down so quickly. For example, when it comes to clothes, it pays off to buy quality pieces for a slightly higher price, since they will last several years in use. It may also be smarter to acquire a new home appliance than resort to buying an used one, and to choose a well-known quality brand instead of the cheapest option.
You can also always repair broken items and clothes whenever possible. This also reduces unnecessary purchases.
Recycling saves money
Flea markets, both traditional and online ones, are a good place to start when shopping for clothing or furniture. When shopping second-hand, you can find stylish and durable designer clothing for only a few euros.
Use the library’s selection Instead of buying books and leaving them on the shelves to collect dust, you can avoid accumulating more items in your home by reserving the same book from the library instead – even multiple times, if need be. Nowadays, libraries also offer a wide collection of Blu-ray movies, console games, and even sports equipment. Take advantage of other possibilities of borrowing instead of buying and ask to borrow different items from your friends or acquaintances instead of renting or purchasing them.
Save money on food
Traditional Finnish food is very affordable. Cook food with seasonal ingredients and take a closer look at the prices of the groceries you purchase. For many products, you can exchange a more expensive brand item for a significantly cheaper store brand option.
Buy discounted products that are close to their expiration date and freeze them for later use. You can also take advantage of different services aiming to reduce food waste where restaurants offer leftover food for a cheaper price.
Passive income brings additional earnings
Passive income means income that you receive even when you are not actively working. This kind of income includes e.g. advertising income received by bloggers, selling online courses or investing. Creating a passive source of income will initially require more work, but is easy and quick to maintain in the long run.
Investing is a source of passive income where wealth is acquired over a longer period of time. By investing in a fund or listed shares, you can generate income by receiving dividends and as the shares or fund increase in value.
Long investment periods may be beneficial to the investor due to the compound interest phenomenon, especially when taking into account the tax benefits that equity savings accounts offer. Investing is not well-suited for saving money in the short term, but it can still be a valuable tool for managing your own finances.
Check out our compound interest calculator and try how much you could generate passive income.