Our personal finances are one of the most important aspects of managing our everyday lives. They also have a huge impact on our future.
The simple truth is that not enough of us are doing everything we can to keep them in good order. Short-sighted behavior with our finances isn’t only non-beneficial.
It can very well lead us right into disaster that spirals in worsening condition until we’re forced to file for bankruptcy. Stop that process right now. Follow this guide to start to turn things around.
Getting a good look at it all
If you want to start making things better, or even to get an idea of where you’re at, you need to start looking at your finances in total. You need to start accounting for every expenditure and all your incomings. Budgets not only help you do that. They can also help you structure the way that you divide your funds up in future.
One of the methods that has started to become more popular is the 50/20/30 rule. This means 50% going to essential expenditures, 20% to financial priorities and 30% to lifestyle choices. Of course, your situation will determine the specific numbers used, but it’s good to have this kind of division in mind.
Real time tracking
One of the most important ways of making sure that you live up to the budget you set is by learning and categorizing how you actually spend your money. It’s easy to factor in things like your bills and your rent/mortgage. But it’s not just the regular payments you need to track.
You need to be on top of all your expenses. It might sound bothersome to record all of these over time, but thankfully there are a lot of ways to make it a much less cumbersome task. Tools like apps that you can use to quickly record whenever you make an expenditure, for example. You need to be willing to always be monitoring your money to really budget successfully.
Reducing your major costs
Budgets don’t just make it easier to organize your money, of course. It can also make it easier to spot ways that you can reduce your costs. Another source of information that can help this is your bank statement. Start to comb over it every month or so. This way you’re much more able to catch subscriptions and the like that you have missed and could easily cancel.
Of course, there are some bills that we can’t get rid of. With a bit of investment and smart thinking, however, we can reduce them. For example, your energy and internet provider might have a better replacement out there if you do a bit of research. Or you can try to live more with conservation in mind to lower your energy and water bills.
Hunting those bargains
It’s not just the big bills that you can reduce, either. Whether it’s for groceries and other necessary expenses or lifestyle choices. You are able to find bargains for all sorts of different aspects of life.
Being a savvy consumer means taking the steps to compare the deals from various retailers. It also means knowing the sites that can help you spot the best deals. Being frugal doesn’t always mean you have to skip out on the things you love.
So long as you’re reasonable about it, you can still enjoy your money and have plenty saved from the purchase. In time, you might even find yourself getting aggressively competitive about finding those deals.
Making more cash
It’s not all about saving money, however. There’s no doubt that a lot of you will also want to make more. It might not seem like it, but there really are quite a lot of different ways to do this. Especially for those of us using the internet.
Blogging, for example, can prove to be a way to make a decent addition to your income. Monetizing your blog with sponsors won’t always get you cash, but the vouchers and free products earned can be just as good in helping you save.
Same for online survey sites where you spend time offering opinions and information for something in return. Of course, you always have the option to sell your old stuff through sites like eBay, too.
Taking care of your credit
If you want to get your hands on more cash, often you may need to look into loans and financing options. Particularly for big expenses like houses, cars or starting up your own business. Or even just getting a good credit card. Your credit report and score show financial providers how trustworthy and reliable you are with credit and loans. Having a better credit score means getting better deals.
Letting it suffer means not only increased interest. It can cut you off from certain options altogether. Taking care of your score is done by making sure your payments are on time and up-to-date. Debts will do damage to it, but will do less if you take care of them as soon as possible.
Managing your debt
Debt injures your credit, but it’s also not a position that any of us want to be stuck under for too long. How you deal with it depends on certain amount of factors. For example, consolidating your debt can be a good idea. But not always.
For example, credit cards have a certain interest rate limit on them that other loans don’t. In cases where you don’t want to deal with multiple sources with compounding interest, this consolidation can be a lifesaver.
If you’re not consolidating your debt, you need to form a plan of attack. The best tactic you will often find yourself advised to do is taking out the small loans first, rather than the high interest ones. Eliminating debt entirely is usually more economically prudent that getting rid of interest.
Reviewing your financial options
There are a lot of different ways to finance the different choices in life. For example, getting a mortgage or a car loan. It’s always a good idea to get yourself pre-approved rather than at the mercy of the sellers who will skew the financing in their own favor.
Similarly, for shorter term loans, you may want not necessarily want to start using a credit card. Instead installment loans can be an option that better fits your ability to pay them back. Always be willing to look for options, not just assume that you only have one choice for your financing.
Preparing for risk
It’s not just about how you get money or deal with danger now. It’s also about how you prepare your finances in the future. In the first of the three future-centric points, we’re going to get a bit doom and gloom. The most common reason for bankruptcy is being unprepared. Particularly, having unexpected costs that you can’t deal with alone. These can easily spiral into debt and eventual bankruptcy.
Insurance is there so that you don’t get into that situation. There’s a lot of different kinds of insurance to buy, of course. So you need to decide which is right for you. Most people are definitely going to need four kinds. Health, home, car and long-term disability insurance will save you from most of the major costs. From there on, it’s down to your individual needs and expenses.
Investments you can make
Hopefully, following the tips above will start to free up a bit of your money. Money that you shouldn’t necessarily be spending on whatever makes you happy. But rather money that you can get to work for you. Making good investments is a strategy for financial growth that everyone should follow.
Regardless of how experienced or inexperienced you might be. If you can follow the markets, it’s not too difficult to spot good bets. Others may prefer to entrust their money to mutual funds that manage portfolios as a collective for them. If you’re going alone, the one tip that you always need to follow is diversify. Don’t place your bets on one horse or you might end up losing it all.
Savings accounts are much like investments but with much less of the risk. Banks will very rarely if ever lose your money. So it’s more a matter of picking which savings accounts are going to work in your favor. As with investments, the answer is to go for a variety. Different accounts can help you with different goals.
Make sure to split your short-term, mid-term and long-term savings. Then to also consider your retirement on top of that and how much you’re able to contribute towards it. There’s no amount of money too small to start saving with, so don’t just sit on your money. Let it grow over time.
No matter how bad the position you find yourself in, there is always an answer. Hopefully the points above have helped you find ways to better your position. All you need is the right information and planning to start your financial recovery.