While it is a common fact that money can’t buy you happiness, it is just as well known that it can bring you some security. If you do not manage your money properly, then you may always feel like you are at the edge of a financial cliff. The fact is, 25% of Americans reveal that they worry too much about money most of the time. In addition to this, based on some studies, two-thirds of Americans are struggling to find $1,000 to cover up their financial losses. If you want to avoid these situations, then you should know how to manage your money properly.
By managing your finances properly, you will have more time to concentrate on the more important things in your life. While life may not get easier all the time, managing your finances effectively can go a long way in helping with this. Fortunately, getting your finances on track is not too difficult. The following are some of the tips that can help you in managing your finances the right way.
How to Manage Your Finances Properly
Keep in mind that managing your finances does not have to be a confusing ordeal. The best thing that you can do is to implement these tips to help you in taking control of your finances successfully.
Take control of your current financial situation
While it is easy to be overwhelmed by the current state of your finances, there is no way that you can obtain financial success unless you take control of your present situation. Be completely honest about any expenses that are affecting your budget or any outstanding debt that you may have. If you make good financial choices, then congratulate yourself for taking these small steps to financial independence. It helps to write everything down to help you see the bigger picture.
Set up the appropriate bank accounts
Setting up the appropriate bank accounts is important to your financial success. Attempting to manage your finances without having the right bank accounts is like attempting to take care of your car without the right parts for the job. It is important that you set up accounts for your savings, checking, and investments. These are the foundation of your financial success.
It is essential that you have both savings and checking accounts. This way, it will be easier for you to separate your cash spending from your long-term savings. If you incorporate your savings and your checking accounts into a single account, there is a good chance that you might accidentally spend your savings.
Create a plan for your money
If you don’t have a budget plan in mind, then you will find yourself short on money quite often. While it is fine to treat yourself once in a while, you don’t want your spending to get out of hand. If you have a lot of unnecessary expenses, then your savings will suffer for it. The best solution to this dilemma is to create a budget plan. Make a plan on where you want to spend your money. Aside from your daily expenses, you have to think about your savings for your future. You also need to look for a budgeting strategy that works best for you.
Monitor your finances daily
It is impossible to make any progress with your finances if you don’t know where you stand. Try to allocate at least five minutes of your time every day to check your finances and budgeting. It is important to recognize whether you are on the right track or if you are overspending. While it is quite tiresome to check into your finances each day, you will find that it is easy to get into it, especially when you realize that it is easy once you get into the habit of it. The quickest way to do this is to use a spreadsheet or an app to help you determine your current financial standing so that you can figure out a plan from there.
Set goals for your money
If you want to get serious with your finances, then you should set goals for your finances. Saving for the sake of saving will not get you far in motivating you to set aside a portion of your salary for savings. Keep in mind that there is no wrong answer to this. Take some time to think about your plans and think about money can affect these plans. This will help you determine how much will be needed to achieve those goals, and how much you need to progress regularly to meet them.
Manage your expenses
As you begin to look into your finances, the first thing you need to look into is your expenses. Start looking for expenses that you could easily eliminate from your monthly budget. Even by eliminating an amount as seemingly insignificant as twenty dollars from your unnecessary expenses, you will be able to save $240 in a year. Some examples of some simple things that you can get rid of include your cable package, box subscription, etc.
Pay your debts
One of your biggest financial burdens is your debt. It not only affects your present budgeting plans, but it can also impact your savings for the future. That is why it is important that take your debt seriously. Paying your debt should always be your top priority. Try to consider various debt repayment strategies and choose the one that works best for you. You should not let your debts affect your financial goals, so make a plan to manage it right away. Many Americans enter their careers with hefty student debt already under their belts, so you should be well-aware of this and make a plan to help manage it as soon as you start earning a salary.
Check your income
While this might seem a bit obvious, it is important that you are aware of how much you earn. Take some time to know how much your net income after taxes is, aside from your gross income. With this number, you will be able to plan out an accurate budget. If you are not satisfied with your current income, then you can consider taking on a side hustle to supplement your current income. You could consider getting a lucrative work-from-home job that is suited to your schedule. This can greatly help in improving your finances.
Another method of increasing your income is to negotiate your current salary with your employer. You should not feel scared in approaching your supervisor and asking for a raise, especially if you have the results and data to support this request.
Know your credit score
Your credit score is a seemingly simple three-digit number, but this has a huge impact on your finances. People with higher credit scores will be offered lower interest rates and better loan terms by lenders. If you are applying for a larger loan such as a mortgage, then you can save thousands of dollars with a lower interest rate. That is why it is important that you take steps to improve your credit score as early as you can in your life.
You can start by checking your credit report for any errors. By using a credit monitoring service, any future mistakes can be avoided. Aside from this, there are other things that you can do to improve your credit score. For instance, you can minimize using your credit card and ensure that you make on-time payments. Having an excellent credit-builder account can prevent you from taking on new debts and rebuilding your credit. However, a credit card is not automatically associated with bad credit. If you use your credit card responsibly, you will find that your credit score will improve. A lack of a credit record can be just as bad as a bad credit record when it comes to applying for loans.
Make a plan for huge expenses
While some expenses are unpredictable, other, larger expenses can be planned for in advance. For instance, if you are planning to pay your insurance all at once, this can cost you thousands of dollars. Rather than struggling to come up with such a huge amount, you could build a sinking fund.
For these larger expenses, you can save every payday to ensure that you have enough to cover them. During these circumstances, budgeting can be very helpful. Try to add this sinking fund to your budget plan so that you don’t have to worry whenever large expenses will come up in the future.
Build your emergency fund
It is absolutely important that you have an emergency fund. You will never know when life will throw huge expenses at you, and it can be a huge challenge trying to come up with the funds to deal with these emergencies. Generally, these emergency expenses are caused by unpleasant events such as job losses or hospitalization. You can never predict when an emergency situation will happen in your life, but you can always prepare for it.
Be sure to allocate a certain amount into your emergency fund every payday. Experts suggest that you should save between three to six months of your expenses for your emergency fund. However, this will also rely on your risk tolerance. How much do you think you need in a worst-case scenario? If it can make you feel better to have more savings, then you can choose to add more savings to your emergency fund.
Always have a separate savings account for your emergency fund. This way, you won’t be able to spend these funds easily. Once an emergency situation occurs, you don’t have to worry about your finances. Rather, you can concentrate more on the emergency at hand. You will be glad that you have taken this important step, and prior planning can help significantly with this.
Shop around for large purchases
Be sure to shop around whenever you are looking to spend for a large purchase. While this may delay the purchase quite a bit, you can potentially save yourself thousands of dollars. For instance, if you are shopping for a car, then you can explore different cars and gather quotes from different dealers to find the best price for your needs. You should not be easily enticed by the first quote. Always make sure that you are getting the best deal for your dollar.
Invest your money
While a savings account is a good place to store your money, interest rates offered by savings accounts aren’t great for those who are looking to grow their assets. The key to wealth growth is by investing your money. The stock market, bonds, and mutual funds are just a few of the investment options that are available to help you grow your money. Many people are nervous about getting into this for the first time, so it’s best to consult with a financial advisor like Money Mgt. Inc to help you choose the best investment option for your risk appetite and financial goals.
Make contributions to your retirement
You might think that saving for your retirement is not necessary. After all, you are not going to retire for decades. Nevertheless, it is absolutely important that you have to start saving for your retirement as soon as you can. The least that you could do is to start investing in any employer-sponsored retirement plans. Be sure that you can benefit from the matching funds provided by your employer.
While you can take many important steps to achieve your financial goals, the best way to do this is by working with a financial advisor like Money Mgt. Inc. We can help you in building your wealth, so contact us at 601-990-2102 or send us an email at jmckennon@virtuecm.com. Let us build your wealth together today!
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