Managing your finances may seem like a daunting, difficult task. However, it’s a necessary evil because financial management allows you to assess your finances. It also helps you start keeping track of your goals so that you can purchase a home or save for other big-ticket items in the future. It’s been a whirlwind of a year with so many people losing their jobs or being laid off due to the pandemic, leaving many of us unaware of our financial state. Luckily, with a few simple tips, you can improve your finances and get yourself back on track.
Know Where Your Money Goes
If you don’t already, start keeping track of all of the payments you make every single month. Collect your bills and take a look at your credit and debit card statements online to get an understanding of all of the places your money is being spent, from groceries to paying back personal loans.
Tracking both the money you’re spending and the money you’re bringing in through your income can help you get a better sense of your current financial situation.
Reduce Your Debt
If you notice that a large amount of your money is going toward paying off debt, it’s time to look into ways to reduce your debt. Reducing your debt can be difficult if you’re spending more than you earn. Luckily, it’s not impossible to pay down your debt even on a limited income. To reduce your debt, make sure you have an understanding of what you owe by keeping a finance log. Here, you should include the interest rate and payoff date so that you can plan ahead for payments.
If you find yourself unable to make payments as scheduled, contact your creditor to talk about a different payment plan. The more effort you make, the more willing they will be to work with you.
Find Deals When You Can
Improving your financial situation can take work. Believe it or not, you’re likely paying more than you could be for things like car insurance, internet service, electricity, gas, and more. Many of us go with the simplest option instead of putting in the work to shop around for the best deals. By shopping around, you can save yourself hundreds of dollars, and all it takes is a little bit of your time.
Similarly, you can also save money by doing things yourself instead of hiring others to do them. For example, you don’t need a lawyer to draft your will. You can create a will without spending a ton of money for a lawyer to help you.
Work with an Accountant
If you’re someone who does their taxes themselves and have complex income and expense structures, you may be missing out on potential deductions that reduce your taxes every year. An accountant uses professional tax software that can help save you money year after year. Not to mention, accountants can give you great advice for managing and handling your finances.
Take a look at your cash flow and the timing of when money comes in versus when it goes out. You’ll also want to look at your cash flow weekly, especially if you find yourself running short. This can help you create a monthly budget so you know just how much you can spend on things like groceries and stuff you buy for fun.
Track Your Bills and Spending
Write down bill due dates on your calendar so that you know exactly how much money will be leaving your account and when. This will help you see a clear picture of when you’re running short on cash. If you find money tight during certain weeks, you can contact creditors and utility companies to request new due dates that align with your income so that you never miss a due date again.
Compare Spending Month-to-Month
Once you’re able to see a clear picture of your spending habits, continue to check your spending at the end of every month. You may find that you spent more in one month versus the next. By comparing months, you can continuously try to lower the amounts you spend so that there are fewer surprises when it’s time to pay your bills.
Create Better Habits
Some of us are really good at handling our money, and others have room for improvement. Creating better money habits through budgeting is easy if you become dedicated to changing the way you handle your money. This includes:
- Applying fondly for credit cards you need
- Checking credit reports annually
- Staying on top of checking account balances
- Getting quotes from lenders before choosing a loan
Have an Emergency Fund
You never know what could happen, so saving money is crucial so that you can get out of a tight spot if there’s ever an emergency. While saving money can sometimes be out of reach, try to put away small amounts every week or month to see a big impact over time.
Create an Emergency Savings Fund
Start putting aside any money you can afford to cover common emergencies like car repairs, medical bills, and others so that you don’t put yourself in debt should these emergencies happen. If you need, open up another savings account just for these types of unexpected expenses so that you know not to touch it during the rest of the year.
Set Rules for Savings
Always set rules for yourself for when you can use the money in your savings. You don’t always have to follow these rules, but make sure that you’re not breaking into your savings to purchase a pair of shoes you want. Instead, make sure you use your savings to pay down medical bills or any other debts you might have or create financial goals that you can reach by adding to your savings month after month.
Make Payments to Your Savings Account Automatically
Have your bank set up a savings account where money can be automatically transferred from your checking account every month. Recurring transfers into your savings can help you build it over time without taking too much money away from your immediate needs.
Put Extra Money Into Savings When You Can
You might not always have the ability to put money into your savings, but if you ever happen to have the extra money in your bank, make sure to put it in your savings and make a rule not to touch it. A tax refund is a great idea of a moderately sized sum you can and should put into your savings every year.
Although saving money may seem like a difficult task to do right from the get-go, it’s possible. By using the tips above, you can improve your finances and save money in the long run. Don’t wait until it’s too late to create better money habits.