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Managing your money can be one of the most difficult things you do if you aren’t a financial wizard or have a degree in economics. It’s very common to put off saving for retirement or for any accidentals that may arise because of bills and other current expenses. Millions of people live paycheck to paycheck, which makes planning for the future very difficult. Whatever your hesitation may be for sorting out your financial hardships, there is no time like today to get back on track. Here are some great tips you can use to improve your money management skills and become your own financial planner.
The first step to becoming more financially stable is figuring out your priorities when it comes to spending your money. Make a list of the fixed payments you must make each month (rent/mortgage, utilities, phone bill, car payment, etc.), as well as how much each of these bills typically are. This will help you estimate how much disposable income you will have to save or use elsewhere. Many people end up squandering their entire paycheck each month on unnecessary expenses while also spending too much on essentials like groceries. Finding the right financial balance is important and having your priorities aligned with your goals for the future will make managing your money much easier.
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Before making any decisions as to what you should cut out of your monthly spending, Track all of your payments using your monthly statements to gain a better understanding of how much you’re actually paying for food, clothing and other expenditures. This will help you isolate areas where you can cut back and give yourself breathing room from your bills every month. Create a spreadsheet so that you can chart your monthly earnings versus all spending to make this process easier. Knowing where you can save will keep you from splurging on those items regularly and hopefully put money back in your pocket.
Now that you are aware of your expenses and the areas of your spending habits you know you can cut back on each month, create a loose budget for yourself to limit the amount you are spending in each category. Eat out less, shop for cheaper groceries, find the least expensive gas stations and keep all other unnecessary spending to a minimum. While at the same time, cut out all bills or payments you can live without. Gym memberships you don’t use, monthly streaming services that are overpriced, and food delivery bills can all be eliminated and save you hundreds in the process. At the end of one month, compare your total savings to that of past months. You may be surprised at the difference you’ve already made in growing your financial wealth!
If you are someone who has accrued a large amount of credit card debt as a result of living month-to-month, don’t fret! Before you start to put away larger amounts of your monthly earnings, you need to allocate as much as you can to get your debt paid off. The longer you hold onto this financial burden, the more interest you will pay — and worse than that — your credit score will begin to spiral. Don’t be afraid to alter your spending habits when it comes to your cards as well. Using a debit card instead of a credit card will help you better monitor how much money you have and how much you can spend. Many banks now offer second chance banking opportunities if you have less-than-perfect credit or looking are to rebuild your financial life. There are so many great resources out there that can help get you back on track.
When you begin to stock away money in your savings, make sure that you designate a portion to an emergency fund for you and your family in case of any unexpected accidentals. Medical bills, car repairs, and house repairs are just a few expenses that could pile up on top of your current debts. And most importantly, an emergency fund is necessary in case you and/or your partner were to ever become unemployed. The general rule of thumb is to have three months of living expenses saved in an account and left untouched until absolutely necessary. This may take some time to accumulate, but is essential to ensure you’re covered from any and all financial downturns.
Although saving money is great, growing your hard earned dollars is even better. If your employer offers benefits such as a 401(k) program or a Roth IRA option to you and your co-workers, you should opt-in as soon as possible. This investment program allows you to set aside a set amount of each paycheck you receive to be placed in an account to be invested. Over time, this money will grow at a much higher rate than if it were in a savings account. Other services such as Vanguard or Charles Schwab offer financial services similar to a 401(k) but is more risky and includes regular account fees. However, these options have the potential to grow your money faster and at a higher rate.
Health and life insurance are also very beneficial if provided by an employer. This will not only save you hundreds of dollars each year, but these fees are taken directly from your paycheck, making them simple and preferred over finding and paying a third-party insurance bill.
Don’t be afraid to reach out to friends and loved ones about your financial hardships. With very few exceptions, everyone at some point in their lives will struggle with bills and debt. Balancing everything, especially if you have a family, can be extremely difficult. Hopefully, those who are close to you can share how they manage their money and what techniques work best for them. These insights may even guide you financial freedom. No one should have to go through these issues alone. And if all else fails, seek professional guidance. Government bailouts and filing for bankruptcy are always options that should be taken very seriously if you feel that you will be unable to climb out of the hole you have created financially.
Once you’ve figured out what works best for you and your family’s needs, have paid down your debts significantly, and are beginning to build a base for your wealth, don’t stop! The last thing you would want to do is get yourself into a positive financial position only to let off the gas. Just like working out or eating healthier, saving money is a long-term endeavor that takes practice and determination to see results. The sooner you begin improving your money management skills, the more saving potential you will have for retirement. Financial gain won’t happen overnight, but over time, you will see improvement and significant growth in your net worth.
Always know that you can either let your money issues get the best of you, or overcome them and build financial security for yourself and those you love. The hardest part of this process is committing to getting a handle on your spending and making a change for the better. Never feel like you cannot persevere when it comes to your financial burdens. Always look toward the future and do your best to have as little debt and monthly expenses as possible. Wealth comes over time and once you’ve reached your financial goals, you’ll not only feel accomplished, but safe knowing you and your family are financially stable.
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