Most people struggle with budgeting. It’s incredibly easy to spend without thinking and to do so recklessly. If you’re one of the many people who have found themselves in a situation that makes you wish you’d spent your money more wisely, simply read on and apply the following information to your life. And remember, you can always hire a professional personal financial accountant to help you out.
1) Budget
Your financial decisions should be contingent on a well-defined budget.
- Calculate Your Expenses: Consult your bank statements to figure out how much you are spending per month (on average). It’s best to calculate how much you spend in six months, or maybe even a year; this is because of intermittent payments such as health insurance. Once you’ve made the calculation, divide the total by the number of months.
- Determine Your Income: Now that you know how much you are spending each month, figure out your actual income. This includes not just your salary, but also extra money that you make here and there. Also, don’t forget things like child support, alimony, interest, rental income, and dividends.
- Track Your Progress: You don’t know if things are improving if you don’t keep track of your successes. When you’ve met a savings goal, record it! This is where the real satisfaction and motivation comes in.
2) Save Money
Yes, we all have bills, and many of us have debt. That doesn’t mean you can’t save money. It doesn’t have to be much. You know how easy it is for a seemingly large amount of money to disappear over a seemingly small amount of time? The same applies to when you save. Open a new savings account and put away just a little bit. You can do this for every paycheck. It doesn’t have to be much. Over time, you’ll begin to see that savings account grow, and the satisfaction and anxiety-relief you feel will be all the reward you need.
Money means freedom. Freedom from anxiety about paying your bills, or what may happen in case of an emergency; be it a health emergency or a vehicle breaking down.
3) Spend Wisely
There are plenty of little things we spend our money on that can add up to serious expenses at the end of the month. You don’t really think about that 2 dollar drive-through coffee in the morning, but do that every day and at the end of the month, you’re looking at $60 spent on coffee. Add to that the restaurant food, cigarettes, and the other little luxuries we like to indulge in. We all need our indulgences. But they need to be kept under control.
One way of controlling this situation is to give yourself a certain amount of money per month that you can spend on these things. Let’s say you give yourself 1 hundred dollars per month to spend on simple luxuries. This will give more structure to your spending habits, and with the right discipline can save you a lot more money in the long-run.
4) Pay Your Debt
The feeling of having your debt paid off is an amazing one. No longer will you be burdened with that yoke around your neck. However, it’s important to be realistic. Don’t forgo necessary spending on bills and other priorities. Dedicate as much of your income as possible to paying off your debt. It will give you more financial and mental freedom, knowing that you aren’t at risk of paying fines for failing to pay what you owe. And remember, not all debt is bad debt. Consider your mortgage, which often comes with tax benefits.
5) Determine Your Credit Score
It’s easy to do this. You can be shown your personal credit score annually, free of charge. Ideally, you want high credit. Having no credit whatsoever is okay, but hardly ideal. Bad credit is what you want to avoid. Having a high credit score will allow you to get loans far easier. You can purchase a house or vehicle easily. Also, the interest rates on these loans will be lower.
There are ways to improve your credit score:
- Pay your bills on time
- Pay off your debt and keep your credit card balances low
- Don’t close unused credit cards
- Get loans and pay them off quickly