Taking good care of your money is a difficult challenge for many people. Before you know it, your paycheck has dwindled away to next to nothing and you still have to wait another week before you get paid. Couple this with a savings account that can barely cover your expenses for a month, and you may feel like you’ll never get ahead.
The good news is that there are plenty of things you can do to change the way you handle your finances. Your financial well-being is ultimately up to you and no one else, so you need to stop the downward spiral that leaves you feeling stressed every month and start good, sensible practices that’ll have your saving account growing. Here are a few starting steps you can take.
Know Your Budget
If you’re like most people with financial problems, you really don’t know how much money you take in each month and how much money goes out. This is a common problem, but one that needs to end quickly if you want to turn your financial outlook around.
The first thing you need to do is to write down exactly how much money your household brings in each month and how much money your family spends in the same period of time. No matter how grim it may look, be honest. Don’t estimate when you have the exact figures for recurring bills like cable, internet and electricity, and don’t round up when you look at your paychecks. Be honest. If you’re not, you’re only cheating yourself now to make yourself feel better and the problems will continue.
Once you have your honest budget, then you can look at trouble areas. Are you spending more than you make each month, or close to it? Then you need to find areas you can stop spending money in, like dining out or other entertainment that you don’t have to have.
As you save money, you can adjust your spending accordingly.
Pay Yourself First
Once you look at your budget, notice how much money you put away each month. If you can, you should save at least 20% of your total earnings each month. You can put this money into a saving account or, if you can, a retirement account that will earn you interest over time.
This can be difficult to do, especially when you look at all of your bills, so before you take anything else into account, set that 20% aside and pretend like it was never available. This is a way to trick yourself into budgeting better while saving money at the same time, the two thing you must do in order to get back on the right financial track.
If you do this for a year, you will see a noticeable difference in your savings.
Don’t Let Debts Go Into Default
One of the worst things you can do with outstanding debt is to ignore it. It’s not going away and if you wait too long, it will go into default, wrecking your credit and further worsening your financial situation.
With the money you have after paying yourself, look at your debts and try to make at least the minimum payment every month. If you budget correctly and spend wisely, this shouldn’t be a problem. Try to never miss a payment and definitely never miss more than one in a row, or else you will face penalties that could make you unable to pay them and result in default.
If you have debts that are just too large, you can consider taking out a loan to pay it off before it goes into default. You can learn more about loans at KingofKash.com/personal-loans/.
Changing your spending habits can be a tough task for most people, so you need to make it fun for yourself to ensure that you stick with it.
Set specific, measurable financial goals for a month, six months and a year, like “pay off car loan,” or “pay off credit card bill each month.” You will be able to track your progress and have confidence knowing that your plan is working.
If you want, you can reward yourself anytime you meet a specific goal. Just don’t go overboard, or you may find yourself right back where you started.
Financial responsibility can be a tough thing to master, so make a plan, set a budget and spend wisely, and you should be on your way to financial freedom.
Joseph Birch is a frugal guy who has made it his mission to help other people change their attitudes towards spending versus saving. He shares practical tips and ideas in his articles which appear on lifestyle and personal finance blogs.