Are you a lousy money manager? Unfortunately, according to a paper published by the National University of Singapore, about 75% of American households are under some form of debt. The percentage is significantly higher than other developed countries, so what are we doing wrong? The problem is not the lack of money but rather the inability to handle your money efficiently.
Nobody likes a lifestyle full of credit card debt, dried-up savings, and the constant stress of not having enough. So, what can you do about it? It’s no rocket science as to how to stop money from slipping away unnecessarily. With a few simple and proven strategies like the following, you can easily manage your expenses and still save enough for emergencies.
1. Lay your expenses on the table:
It is unwise to move forward with managing your finances without knowing where you stand. Before thinking about how much money you can spend, you need to know where that money will go and how much you have.
So, start by keeping track of all your expenses, from all monthly household bills to expected miscellaneous spending. It is easy to forget how much money you spend without it being on paper. However, once you write down all your finances and categorize them, you’ll be surprised to know how much you spend on unnecessary things.
Keep all your bank statements, credit card bills, grocery receipts, etc.,and round them up into an average monthly figure.
2. Think about your financial goals:
One of the best ways to take control of your finances is to set money goals. For instance, you’ve been meaning to pursue an online masters of accounting as a way of setting the tone for your career development. However, every time the funds fall short, and your education gets further delayed. This is where setting financial goals can help you in terms of saving funds for your priorities.
When you have a specific financial goal in mind, it gets easier to make a budget and work according to it. It’s time to make a separate list of priorities apart from the inevitable monthly bills and rank them in their importance. Remember, some of these goals won’t be affordable right away, but they will guide you to save enough to afford them eventually.
3. Create and stick to a budget:
Now that you know your financial situation and expenses, the next and the most critical step is to design a budget according to your income. This will be a difficult task because you’ll have to ignore your impulse on allocating money to unnecessary things.
Design your budget according to your financial plan and categorize everything from bills to even how much you can afford to spend eating out. Ensure that you create a detailed budget that covers everything down to the smallest of purchases you are likely to make.
Budgeting stops you from overspending and gives you clarity on the nonessentials you wasted your money on. You can take help from different budgeting apps such as PocketGuard and Zeta to keep things more precise and up to date.
4. Make an emergency fund:
One of the primary goals of managing your finances in the first place is to save funds for a rainy day. Once you start to follow your budget and cut extra spending, you’ll automatically save enough to create an emergency fund.
Here’s a helpful tip for you; instead of keeping what’s left at the end of the day, include separate savings for the emergency fund.
For instance, you can allocate 5% to 10% of your total income each month into emergency savings, and you can increase that number as your income increases. You can also use different methods to open a savings account, IRAs, mutual funds, CD, and more.
5. Take care of your debt:
Debt can suck the life out of you if you don’t pay it off on time. It can get in the way of your budget, lifestyle, and even mental health. Being in debt is a dreadful feeling, and most people trying to handle their money management are looking for a way out of debt.
Luckily, with the steps you have already taken for saving money along with several other options, you can eventually pay it all off. A few things you can do if you have credit card debt; ensure that you pay the minimum amount as soon as the bill arrives.
Try using only one or two cards for a while, and don’t go into paying them individually. You can combine various unsecured debts such as payday loans, personal loans, credit cards, etc., into one bill.
Money problems can stack up high if you don’t pay attention. It’s easier to think a tight budget will deprive you of living your life, but an empty account will land you in worse situations. If you work towards handling your finances properly today, then you’ll be able to enjoy a carefree life tomorrow.
Therefore, stop using those cards, sit down, and start writing your expenses. Take a long hard look at your financial situation, set goals, and create a budget that you can easily stick to. Make it a priority to save, if not regularly, then monthly, and invest your savings whenever you get a chance.