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At times, it becomes relatively easy to lose track of your finances – especially if you’re not sure what you’re doing or you’re just too busy to notice.
Personal finance majorly involves securing a comfortable life not only for you but your family as well. It’s highly essential that you have a clear understanding of how to spend your money and how to save it as well.
Unfortunately, most people don’t have a clue where the money goes every month. This can indeed be very worrying especially if you have a family to take care of. However, with the proper techniques and relevant know-how, money should never be an issue.
As a matter of fact, it can be quite interesting to have a full understanding of how to gain control over your finances.
Here are some of the tips and strategies that you can put into action to improve your finances for the better:
1. Make a Personal Budget
Every individual that’s having it rough with their money needs to have a budget. Not only will it change your financial future, but it will also allow you to have a clear plan for your money.
At first, budgeting starts out as an easy task. The more you get into it, the more you may be tempted to stray from it – and that’s totally understandable.
There are thousands of reasons why people choose to spend their daily or monthly income without a budget.
The most common being that it has a lot of restrictions. Truth be told, your budget is rather similar to a fitness tracker. No matter how much you make every month, you’re assured of building a solid future.
Benefits Of Having a Budget:
Relieves Financial Stress
While having a budget doesn’t magically dissolve all your financial problems, it will give you peace of mind.
How often do you get financially dry at the end of the month? Most likely more often. As a result, you end up being depressed and distressed.
Get rid of that panicky feeling you get every end month by assigning a dollar to all your needs.
Decreases The risk of debt
Once you’re all out of cash at the end of the month, your last resort is most likely a credit or debit card.
Slowly but surely, the overall balance accumulates. to avoid spending more money than you make, it could be worth your while to make a daily, weekly or monthly budget.
Either of these will prevent you from taking a swipe at your savings or credit card.
Makes your finances work for you
More often than not, it’s the other way around. Simply put, having a budget gives you control over your finances.
This doesn’t automatically mean that for you to reach your goals, you need to make more money than you’re making right now.
All you need to do is to have a tool that assists you to reach your goals faster by impacting your daily financial choices.
To cap it all up, having a clear plan of your money makes you feel better about yourself, your life, and most importantly your financial status.
If you’ve never made a budget before, a budget planner tool could be very useful to you.
2. Quit Splurging on Outside Meals
One of the simplest ways of taking charge of your finances is steering clear of ordering in or eating out at restaurants.
Most people owe their eat-out habits to busy schedules and the attraction to professionally cooked foods.
There’s no problem in splurging on a nice meal occasionally (most preferably during the weekend). Once you make a habit out of it, however, you’ll be hooked to it on a financially critical level.
The good thing about eating at home is that you not only get to make some major savings, but you’ll also get time to spend with your loved ones.
If you need a source of motivation to prepare your meals at home, look at how much you have left in your account.
Recently, there has been an upsurge in the cost of restaurants meals. It may cost you up to $2,000 a year on buying lunch rather than making it yourself.
If you have some spare time in between the week, take time to hit the grocery store and buy everything you need.
Even though you may not be around to cook every day of the week, you can still prepare your meals early in the morning before you leave for work. Make a habit of this and you stand to save up to $832.
3. Learn the Art of Investing
Among the key steps of building your wealth is learning how to invest. Even for as little as $50 every month, you can kick start your investment journey.
As expected, you will need to develop some good habits, including being more than willing to sacrifice. There’s no specific time to start investing. As early as now, you can begin training yourself to save and invest.
It’s worth noting that there can be no investments without savings. So to invest, you need to save. Every week, put away as little as $10 which will add up to $500 in a year.
It doesn’t matter where you put it; a small safe or a shoebox can work out just fine.
Alternatively, you could opt to start investing right away. Download the Acorns app to have a complete roundup of all your credit and debit card purchases and then invest the difference.
For first time investors, the following investment apps will provide a simple and accessible approach to investing:
Swell investing is perfect for you if you seek to spend responsibly. They offer a low minimum of just $50 and they don’t invest in specific industries such as weapons, private prisons or tobacco.
Don’t let the mere thought of investing intimidate you. It shouldn’t also be a stumbling block in your wealth–building journey.
You can arrange a meeting with a financial advisor, learn the basics by enrolling in an investment class or talk to a family member.
Wealthfront we’ll manage your first $5,000 at no cost at all. They have a reasonable fee of 0.25% of your investment. This app is the way to go if you’re looking to invest with the least amount possible.
You just need $100 to get started on M1 Finance. Aside from that, there are no management fees or commissions. What’s more, it has a relatively simple user interface that anyone can use.
4. Set Yourself Some Achievable Goals
If your working towards taking charge of your finances, you might as well set some reasonable financial goals for yourself.
It’s highly difficult to get the motivation you need if you don’t have certain things that you’re aiming to achieve.
A common misconception about setting goals is that it only works for people within a certain income bracket or age group.
No matter what stage you are in your life, financial planning is key. How exactly do you begin setting your financial goals?
First, begin by figuring out what it is that matters to you. Most people settle for a college savings plan, home or a car.
Write them down and prioritize them according to their level of importance. In this case, you can take care of your children’s fees, then buy a home and later on a car.
Your goals should be realistic at all times. Take your expenses into account and create a budget based on that.
Once you figured out all the expenses, determine how much income you’ll have left for retirement and savings.
A common occurrence among senior citizens is that they never have leftover income by the end of the year.
You can do things a little differently. From your income, take a certain percentage and be yourself. Deposit it into your savings account, get it into a suitable plan then maximize your savings for retirement.
A couple of service providers and most banks provide automated payment systems that can be extremely beneficial to your financial life.
At the end of it all, keep a regular check of your progress so far. You could do it on your own or you can hire a manager just as long as you don’t stray from the goals you’ve set.
5. Work Towards Paying Off Your Debt
There are two common forms of debt:
Mostly arises as a result of over swiping your credit cards. It’s relatively easy to accumulate huge balances from month to month.
You’re entitled to borrow as much as you wish, but keep in mind that interest rates change from time to time. There’s also a predetermined credit limit that should never be crossed at any given time.
Comes from personal loans, student loans, car loans and mortgages. Typically, your month-month payments, interest rate and how much you borrow are all fixed from the very beginning.
Both of these types of debt dictate that you should pay on time. Upon defaulting on a payment, you could be reported to the credit bureaus by your lender.
This could have a huge and negative impact on your individual credit reports for the next seven or so years. Things are bound to get even worse when you have a high credit card balance from multiple cards.
How exactly, can one pay off their debt when they keep borrowing almost every day of the month? If we were to get into the details, it would be a different post altogether.
However, here are a few ways you could achieve debt freedom:
File For Bankruptcy
Only use this option as a last resort, as it could greatly dent your credit. The two types of bankruptcy you could file for are Chapter 7 and Chapter 13. Declaring either of these can be a really involving and engaging process.
Basically involves you negotiating with a creditor, such as a collections agency or credit card company to pay fifty per cent less of what you owe them. This can work out if you have proof of divorce, medical issues or loss of a job.
Using personal loans to settle credit card debt may work out for some, but it may be downright overwhelming. In situations whereby you have debt from different credit cards, it wouldn’t be such a bad idea to pay them off using a personal loan.
This involves the transfer of debt from a credit card account that has a relatively high-interest rate to a different one that has a low-interest rate. Over time, you’ll spend less in interest by using one credit card to pay for another.
It’s totally impossible to take charge of your finances with an unbearable burden of debt on your shoulders.
Credit card debt is the most common form of debt – that’s for sure. With the simple strategies mentioned above, it will be easier to liberate yourself from the bondage of debt, possibly for the rest of your life.
6. Refrain From Using Your Credit Card More Often
As noted in the previous point, most of your debt comes about as a result of using your credit card more often than you’re supposed to.
Most people come to the defense of their credit cards that it’s strictly for emergencies. In time, the interest starts adding up and before you know it, you’re in debt of a huge sum of money.
All that can be avoided by eliminating the need for a credit card in the first place. You first need to determine why you use your credit card.
You may find it easier to use compared to real cash, and that’s totally fine. Making a habit of swiping it each time you get the chance is where the problem arises – unless you have alternative ways of increasing your income.
Keep in mind that you’re using a credit card that gives you the impression that you should spend more money than you earn.
Working extra time can give you all the money you need to finance your extravagant lifestyle. Better yet, rather than wasting it all on a card, you can easily budget what you earn.
By planning your expenses carefully and getting a clear arrangement of your finances, you can have more than enough to cover all your essentials.
Never again will you have to depend on your credit cards to give you that extra financial push till your next payment. Refraining from making luxury purchases with your credit card is a personal decision.
Quit teasing yourself by window shopping and convincing yourself that you can afford the clothes or shoes or whatever else that catches your eye.
Finally, it wouldn’t hurt to pay the old-fashioned way. It’s easier to part with ‘imaginary cash’ on a credit card than it is to part with those crisp-clean notes that you’ve put all your time and effort into earning.
7. Have More the One Source of Income
Often, not all financial problems are caused by how you spend your money, but its all as a result of inadequacy.
You’re doing everything right and playing by the book but you still find yourself trapped in the same old problems.
At this point, you need to reconsider your current income and see how to add to it rather than relying on it to sort out all your problems.
If you’re more than willing to work off early morning, weekend evenings, you’re eligible for a part-time job. Not only will you be adding to what you’re earning at the moment, but you’ll also be:
- Boosting your resume
- Exploring a different industry
- Lowering your risk of losing your job primarily
- Enhancing your social life
When the time is right, you can even consider starting your own business. It makes a ton of sense to work in two different industries and gain the necessary experience from either or both of the two.
Keeping in mind the slow job market and global economic recession, it may not be as easy to land yourself a decent, well-paying job.
Especially if you live in a big city, catering for all your monthly expenditure may be ‘a bit’ of a struggle. That’s why most people are resorting to online jobs.
There are tons of jobs you can do online in your spare time. You could choose to do them on a part-time or full-time basis. One of the benefits of working online is the flexibility – work according to your own schedule.
While most of them are very easy to accomplish (watching videos, filling out surveys etc.), there are those that require you to have some form of education or expertise (transcribing, virtual assistance, graphic designing, etc.).
You’ll typically be paid based on the complexity of the job you’re undertaking.
8. Utilize Your Employee Benefits
Employee benefits are financial compensations that are non-inclusive of your monthly income. These benefits vary depending on the company and its policies.
Some of the most common employee benefits include vision care, dental insurance, life insurance, retirement plan, child care, fitness, sick leave, flexible spending accounts and personal leave.
All of these are covered under a joint labor agreement and are offered at the employer’s discretion.
All the incentives, perks and bonuses are all moves by employees to retain and recruit new employees.
If you’re happily employed or searching for a new job, it’s always advisable to review all the employee benefits packages.
You will be able to determine from there whether or not the offered benefit coverage is enough to suit your needs.
Ask all the relevant employee benefits questions to ensure that the compensation you’re receiving is right for you and your family. Not all of them may be worth the extra cash you spend on them, but a couple of them are.
Utilize each one of them to the fullest to avoid spending directly from your income. In any case, it wouldn’t make sense to spend your income on stuff that your company is already catering for at no cost at all.
9. Make Sure You’re Receiving the Right Level of Insurance
Insurance can indeed be a rather peculiar industry. It’s there for your protection, but it can turn out to be a huge waste of resources if you don’t really need it in the first place.
If you find yourself in an emergency and you have no form of cover, it can turn out to be a nightmare on your end.
While there’s no need to insure all your property, there are five basic insurance coverage you should have by now: auto insurance, health insurance, home/rental insurance, disability insurance and life insurance.
At the moment, you may be spending unnecessarily more on other insurance coverage that may not be beneficial to you in any way e.g credit card insurance, cancer/disease insurance, etc.
Your hefty paycheck may mislead you into scrimping more on insurance – which should never be the case.
Get the right amount of coverage that will sort you and your family out in case of a financial emergency.
Before signing up for any of them, do the necessary consultations and settle for the ones that resonate with your earnings.
As always, beware of amateur insurance salesmen that will stop at nothing to see you spend your money on their fake services.
10. Secure Your Retirement Savings
Whether you’re twenty-two or fifty-two, start setting something aside for your post-retirement life right now.
The sooner you embark on your savings journey, the more time it will have to grow. The gains you generate from each year can easily generate the next year’s gain – a simple but powerful financial phenomenon referred to as compounding.
If you settle on utilizing your retirement benefits in an orderly manner, they can still be beneficial to you in more ways than one.
While employer-sponsored retirement plans such as 401(k)s are subject to investment and market risks, the sooner you begin your contribution, the higher the chances of you benefiting from compounding.
Saving for your retirement and knowing where to save it as early as now has a number of benefits. Work hand-in-hand with your financial advisor to assist you in setting new savings goals. This simple move will get your back on track towards enjoying a successful financial future.
Are You Prepared to Take Charge of Your Finances?
Gaining a stable sense of financial security should be your main area of focus as a working-class citizen.
As you work, you should be able to enjoy the labor of your hands without worrying about what tomorrow holds.
These 10 tips to help you gain control of your cash will benefit you significantly if only you take your personal decision seriously.
With proper preparation and planning, you’ll be light-years ahead in terms of your overall financial security.