There’s never a better time to start managing your finances than the present. No matter what your current financial situation, taking the time to better manage your money can prevent you from accumulating debt and help you to achieve your goals faster.
Whether you are currently in a cycle of debt, planning on buying a home, or simply want to save more money, getting organized with your finances can help you to manage your money more effectively. Strategies such as budgeting, setting financial goals, and reducing your monthly bills can help ease the financial burden and make your financial goals more attainable.
Here are 5 tangible ways you can take care of your finances straight away:
If you don’t have a budget, start one now
Is setting a budget really necessary? Short answer – yes. The importance of setting a budget has been regurgitated in financial management material for decades, and for good reason. A budget is used to help control your expenditures. By setting a budget, you can plan how you spend and save your money from month to month, based on how much you typically earn.
To start, write down your income and all your monthly expenses. These can include:
- Household bills
- Living costs (groceries, fitness, health care etc.)
- Travel expenses (petrol, commuting expenses)
- Car payments
- Rent or mortgage expenses
- Loan or debt repayments
- Subscription services
One of the easiest and quickest ways to work out your budget is by using an online budgeting tool or budget planner. Simply grab all your bank statements, bills, receipts etc. from the past month and enter all your expenditures. Alternatively, you can use a Spreadsheet or simply write down your budget by making a list of your fixed expenses followed by variable expenses and any miscellaneous expenses such as birthday gifts or maintenance costs. Once you’ve added up all these expenses, subtract them from your income. The best way to track your spending and keeping on top of your finances is by doing this exercise monthly.
Clear your debt
One of the most important ways to take care of your finances is by getting out of debt. According to a recent survey one of the biggest reasons people borrow money is to consolidate their debt.
Comparing generations, the leading reasoning for taking out a personal loan is similar. 37.1% of millennials take out personal loans to consolidate their debt, while 39.6% of Gen Xers and 37.4% of Baby Boomers use personal loans for debt consolidation.
Financial debt is one of the biggest and most common barriers in the way of financial freedom. To get rid of debt, the first thing you should do is pay it off as quickly as possible. Start by listing all debts (credit card, student loans, car loan, etc.), find out exactly how much debt you owe, and then figure out the minimum you owe on your required repayments.
If you have multiple debts, look at consolidating them and try to get the lowest interest rate possible.
Be conscious of your spending
If you’re serious about taking care of your finances, then it’s important to be conscious of what you’re spending your money on. If you purchase a $4 coffee every day before work, you could be spending up to $1400 a year. That’s $1400 you can save simply by preparing your own coffee at home. The same can go for unused gym memberships or entertainment subscription services. Get the magnifying glass out and find areas where you can cut back on your spending. If there are costs that you can’t go without, then perhaps look at how you can reduce these costs. Can you get a cheaper mobile plan? Is there a way you can pay for fitness classes as you go instead of locking into a yearly contract?
Remember, the idea is to save as much money as you can by slashing any unnecessary expenses. Learning how to manage your finances in this way can give you the extra push you need to get out of debt and save money.
Set a savings goal
The best way to start saving money is to transfer some of your pay into a savings account every month. It’s generally recommended to get three months’ worth of savings in an easy access account to serve as an emergency fund. Once you have money in your emergency fund, you can begin saving for your financial goal.
This can be anything from a new home, car, or a holiday. Having a financial goal helps to keep you motivated to stay on top of your finances. Just be sure to keep your savings goals realistic. You probably won’t be able to save half of your paycheck every month, but putting away 20% of your income is achievable and can be used to pay off your debt, save for an emergency, or to reward yourself.
Make more money
There are ways to make more money if you find that your current income is hardly enough to stay afloat. Taking care of your finances can include researching ways that you can earn more. Whether it’s taking up a new job, having a side job, or by becoming an investor. Think about your existing skills and ways you can profit from them. You may want to invest in advancing your skillset in a course to become more competitive in your field, enrolling in an investing workshop, or taking up freelance work to multiply your income stream.
Develop healthier financial habits
You can get out of debt, earn more money, and achieve your financial goals simply by taking care of your finances. Good money management skills can help you with your finances and relieve you of any financial burdens that may be in the way of achieving financial freedom. Following these strategies will not only help you to live more comfortably but will also help you to develop a better attitude toward money. By looking at your finances with the right mindset, you are more likely to become more conscious of your spending and to develop healthier financial habits to support your lifestyle without going beyond your means.