Money can be the best and worst of your existence. When you have a good relationship with money life is easier, you have more freedom, and it frees up mental space to enjoy life. But when your relationship with money is bad it can become stressful, overwhelming and like you’re in a constant battle that’s impossible to win.

But money need not be a fight to the death in the trenches. With a little effort you can master your relationship with money and reap the rewards of freedom. Here are seven ways to improve your relationship with money.

Acknowledge it.

When your relationship with money is bad the temptation is to avoid it. Our brains are naturally wired for reward and if something is not rewarding, we tend to procrastinate or worse, ignore the problem all together.

All this really does is prolong the worry and allow the problem to spiral further out of control. When you face up to a bad situation, it may still be bad but at least you now know where you are and once you know that you can start to build the solution.

Know your history.

A bad relationship with money doesn’t just pop into existence, there’s a reason behind it. Perhaps your parents unintentionally taught you bad behaviours, perhaps you’re in the wrong circle of friends, perhaps you’re rebelling against years of financial struggle.

Whatever the reason, it’s important to establish the cause and take responsibility for your part in it. Much like acknowledging the problem, this can be uncomfortable but if you know how your relationship got here and take responsibility for your part in it then you can stop making the same mistakes.

Set your goals.

Now that we’ve dealt with the discomfort, let’s start looking at the fun part, building the life you want.

Goals don’t need to be grand to be life changing. Set yourself some small goals that will help build momentum, maybe paying off some smaller debts, building a small buffer for emergencies, or getting ahead of a big expense like holidays by saving a little each month.  Achieving these smaller goals will give your brain that reward dopamine that will drive you to achieve more and start rewiring your relationship with money.

Bigger goals can feel out of reach, particularly if you don’t have a lot of money to put towards them. But everyone needs to start somewhere. Think about the big goals you want to achieve in life and just start, no matter how small. As time goes on, momentum will build, life will start to change, your focus will grow, and that big goal gradually starts looking more like reality. But this doesn’t happen without that first small step.

Budget

If you’re going to take control of your money, you need to know where it’s going. Thankfully, there are many banking apps that will do this for you. Once you have a good idea of what your expenditure is you can start to budget for what’s important.

Prioritise necessities, such as living expenses and debt payments. Most of these will be fixed, but where they are variable, like food for example, set yourself a budget.

For non-necessities, you need to set boundaries with yourself. Setting a manageable budget for fun shopping or eating out can allow you to enjoy life without overextending yourself.

Finally budget some of your income for your future, be that savings, investments or pension funding (ideally all three). This will help future proof your financial life and ensure you never need to have a bad relationship with money again.

Form beneficial habits.

A good way to build wealth and manage impulsive decision making is to make budgeting, saving and investing habitual. Setting up automated payments to bills, savings, investments and a separate spending pot keeps you on top of the goals you have set for yourself and your money.  Separating your spending money into its own account prevents you from overspending and ensures that you are always taking care of the necessities and your future self.

Savings

A good rule of thumb for savings is to have 3-6 months of expenditure set aside for emergencies. If that seems too daunting, just start with having a £1,000 pot that can be dipped into for life’s unwanted surprises, for example if the boiler breaks or car needs repairs. Having a little set aside can prevent you from going into debt or worrying where you will get the money from when you unexpectedly need it. Over time it is prudent to build your emergency fund up to 3-6 months expenditure to cover larger emergencies such as job loss or larger home repairs.

Once you have a buffer for emergencies, it’s time to look at those short-term goals. Here we are looking at any goals that will need funding in the next 3-5 years. Start setting aside some money into a savings account for these. Even if it’s a small amount, just get the ball rolling.

Investing for your future

Disposable income beyond an emergency fund and any cash needed in the short term, should be invested for long term capital appreciation. This can be in the form of investments such as ISAs or share accounts or building pension assets to sustain you in retirement.

Most employers will offer you a company pension scheme and will match the contribution you make up to a certain percentage. Maximising the matched contribution available from your employer into a pension is not only extra money for free but it’s a highly tax efficient form of investing for your retirement. Any contributions you make to a UK registered pension scheme attract tax relief from the government at your marginal rate of income tax. So, if you’re a basic rate tax payer and you pay £80 into a pension, the government tops this up to £100.

Follow these steps and you’ll be well on your way to mastering your past, present and future relationship with money.

Please remember, this content is provided for information purposes only. Investment involves risk. Past performance is not a guarantee or indication of future results. Investment return and the principal value of an investment may go up or down and may result in the loss of the amount originally invested. All investors should seek professional advice prior to any investment decision, to determine the risks associated with the investment and its suitability.