To improve your personal finances, you don’t need a higher-paying job or an inheritance from a relative. For many people, better money management is all that is required to reduce spending, improve their ability to invest and save, and achieve previously unattainable financial goals.
Even if you believe your finances are in a rut with no way out, there are a number of steps you can take to improve your situation. Here are seven examples to get you started.
1. Keep track of your spending in order to improve your finances
If you don’t know what and where you’re spending each month, chances are your personal spending habits could be better.
Spending awareness is the first step toward better money management. Use a money management app like MoneyTrack to track your spending across categories and see how much you’re spending on non-essentials like dining, entertainment, and even that daily cup of coffee. You can make a plan to improve your habits after you’ve educated yourself on them.
2. Make a reasonable monthly budget
Set a budget based on your monthly spending habits as well as your take-home pay.
Setting a strict budget based on drastic changes, such as never eating out when you currently order takeout four times a week, is pointless. Make a budget that fits your spending habits and lifestyle.
A budget should be viewed as a way to encourage better habits, such as cooking at home more frequently, but you should also give yourself a realistic chance of meeting this budget. This is the only way this method of money management will work.
3. Save as much as you can, even if it takes time
Make an emergency fund that you can use when unexpected events occur. Even if your contributions are small, this fund can save you from potentially dangerous situations in which you are forced to borrow money at high-interest rates or are unable to pay your bills on time.
You should also contribute to a general savings account to strengthen your financial security in the event of a job loss. To grow this fund and reinforce the habit of saving money, use automatic contributions such as FSCB’s pocket change.
4. Always pay your bills on time
Paying your bills on time is a simple way to manage your money wisely, and it has numerous advantages: It assists you in avoiding late fees and prioritizes necessary spending. A solid history of on-time payments can also improve your credit score and interest rates.
5. Reduce recurring charges
Do you pay for services you never use? It’s easy to overlook monthly subscriptions to streaming services and mobile apps that charge your bank account even if you don’t use them frequently.
Examine your spending for such charges and consider canceling unnecessary subscriptions to save more money each month.
6. Save money for large purchases
Certain types of loans and debt can be useful when making large purchases, such as a house or a car that you urgently require. However, for other large purchases, cash is the most secure and cost-effective option.
When you pay cash, you avoid accruing interest and incurring debt that will take months, if not years, to repay. Meanwhile, that saved money can sit in a bank account and earn interest, which can be applied to your purchase.
7. Begin developing an investment strategy
Even if your financial resources are limited, making small contributions to investment accounts can help you use your earnings to generate more income.
Find out if your company offers 401(k) matching, which is essentially free money. Consider establishing a retirement or other investment account.
Changing your own habits is the first step toward better finances. Some of these changes will be more difficult than others, but if you stick with it, you’ll end up with great money management skills that will serve you for the rest of your life—and, in the meantime, you’ll have more money in your pocket.