Personal debt in the US hit an all-time high of approximately $14.6 trillion, shared across 340 million people. Debt isn’t necessarily bad, depending on what use you make of the money you borrow. Unfortunately, financial imprudence and bad management habits do most people in.
There’s no one size fits all approach to proper money management. How you manage your money depends on your circumstances and current financial situation. However, there are a few money management tips that apply across the board.
If you’re having trouble keeping your finances in check, worry not; we’re here to help. Today, we’ll be highlighting a couple of invaluable tips for managing your finances. That way, you can take the right steps to regulate your spending and achieve your financial goals.
1. Create a Realistic Budget
The first step in keeping your finances in check is to create a monthly budget and stick to it. This budget should capture all your monthly expenses, but remember to include a little extra cash for emergencies.
It’s very important to create a realistic budget that matches your lifestyle and needs. There’s no use creating a strict budget that you can’t stick to. That’s right; you can include take-outs and drinks in your budget, as long as you stick to it.
Proper budgeting ensures you have money for everything you need, and you don’t overspend on unnecessary things. Budgeting also helps you save better so you can achieve your financial goals. That said, here are a few steps to creating a properly budget:
Add your total income: The first step is adding how much you earn every month. This includes your salary, business earnings, bonuses, and any other income.
Add all your expenses: Next, you need to add all your monthly expenses. The best way to do this is to categorize all your expenses into clusters like “food,” “housing,” and “utilities.” Ensure you get all your monthly expenses for a proper budget
Subtract your expenses from your income: Subtract your expenses from your current income. You can save the remaining amount or use it to pay your debts.
Try creating a budget spreadsheet that you update every month. If you’re not that tech-savvy, it’s okay to use the traditional pen and paper method. Anything goes, provided you create a coherent budget to guide your monthly spending
2. Keep Track of Your Spending
Financial prudence starts with keeping track of your expenses. If you have no idea how much you spend every week or month, you’re more likely to overspend on unnecessary items. That’s why it’s vital that you keep track of your everyday spending.
An easy way to do so is by downloading a budgeting app from the plethora of options online. That way, you don’t have to walk with a notebook and pen every time you shop. A mobile app is super convenient, accurate, and is way better than carrying a notebook and pen.
Remember, your budget goes hand-in-hand with your budget. There’s no way you can overspend if you keep to your budget.
3. Keep Your Credit in Check
Having a good credit score is great for your finances and opens you up to plenty of opportunities for financial prosperity. A less-than-stellar credit score can affect many aspects of your life, not just the financial aspect. A poor credit score makes it harder to land jobs, rent out apartments and qualify for loans.
Here are a few tips to help you increase your credit score:
- Pay your bills on time
- Establish a robust credit history
- Don’t exceed or get too close to your credit card limits
It’s also a good idea to keep a close eye on your credit reports. You can get a free credit report from the three credit reporting bureaus every year. This report should give you a good idea of your credit situation and your loan viability.
4. Make Arrangements to Pay off Your Debt
If you have any pending loans and other payments, it’s time to pay up. Plan to pay off all your debt to reduce money-related anxiety and manage your finances better. There are a couple of tactics you could employ to reduce your debt burden.
Some of these tactics include:
Debt consolidation: This involves rolling up all your debts into one loan with a single monthly payment. To consolidate your debt, you can borrow a loan, then use the loan to pay off high-interest loans. After paying off high-interest loans, you pay off the other loan in single monthly payments.
Debt Avalanche: With the debt avalanche method, you list all your debts starting with those with the highest interest rates. You then channel your debt repayment efforts to those with the highest interest rates first. When you’re down with those, you can now pay off the low-interest loans.
This can help you save a bundle in interest fees in the long run. In fact, you can use the money you save to pay the low-interest loans.
5. Talk to the Pros
If you’re deep in the financial doldrums, it might be a good idea to talk to financial experts for professional financial advice. This is especially true if you need help managing both personal and business expenses.
A financial advisor can give you crucial insight into your spending and borrowing habits. They will help you eliminate unnecessary expenses and develop foolproof strategies for complete financial security. You can also get sound investment advice that can help you improve your financial situation permanently.
Effective Money Management Made Easy
The above money management tips should help you get your finances right and achieve your financial goals. Reading this post is a great step towards financial literacy, but now it’s time to put the words into action. Your financial prosperity depends on it.
Contact us today for unmatched financial and wealth management advice. Our team of wealth managers will be more than happy to give you a hand.