Many people encounter problems when it comes to managing their finances. This happens because they are not organized enough, they have previous debt that they need to pay, they don’t know how to track expenses and so on. In order to learn all these things about finances, they need to invest some time and attention in learning how to become financially smarter and keep the numbers between the limits. This article is supposed to present the easiest and most efficient ways to manage money and avoid accumulating debt any further. The tips you find here may be difficult to apply at first, but once you turn them into a habit, these actions are going to become part of your routine. Here’s what you should know:
How to track your expenses
The first thing you must learn in order to bring your finances to the right path is represented by expense tracking. In many cases, people don’t understand where their money goes because they don’t smartly track what are the things that require spending each month. You can either start an agenda and write your spending down, or you can use one of the many available smartphone apps, that also remind you to insert your expenses at the end of the day. Apps are more appropriate for this task because they also make the necessary calculus to add up your expenses at the end of the month.
To start tracking your expenses, you must determine what your total income is. The total income includes all the money that you gain, no matter the sources. To calculate your total income, start by adding up your base salary, any spousal support, child support, social security support or side hustle. If you gain any bonuses, gifts or donations during that month, add them to the income category as well. Basically, any sum of money that you receive must be added to the total income. Once you do that, you can start extracting the expenses. Separate the expenses into categories.
The most important expenses are represented by housing and food. Housing expenses include the money that goes on mortgage, rent, home insurance, taxes, maintenance and such. Food expenses include groceries, work meals or money that you spend on coffee, restaurants etc. Paying the utilities is next. This category includes any electric, gas, phone, TV and Internet, trash and other bills. Then, make sure to pay insurance bills, healthcare bills and any services that you have active memberships for. Another expense category has to do with savings. This category can’t miss from a financially-stable person’s plan. You need to set up an emergency fund and a home fund. If you have children, you need to put together a college fund for future education expenses.
How to improve your financial situation
In case you struggle with finances and you can’t cover all the expenses at the end of the month, you need to find ways to improve your current financial situation. The best method to do that is by starting a side business. It might sound too difficult at first, but there are all sorts of side businesses that don’t require much time or effort from you. If you can’t start a business, you can look for part-time jobs or weekend jobs that could help you gain an extra amount of money. Keep in mind that this solution is temporary and you shouldn’t overwork yourself. Building an investment account is another option you have. Most banks offer commissions for people who save a certain amount of money per month. Take advantage of that commission and start your investment account. As for purchases, try to reduce your expenses to a minimum and select shops that offer promotions and sales. There is a rule that you can follow to understand finances easier and save some money on the side. This rule is called 30/30 and it involves the following principle: to avoid unnecessary purchases, anything that costs more than $30 should wait 30 days, only if it’s not paramount for a living. This rule will help you stave off purchasing impulses that you may have. In case you still encounter financial problems, you may want to get a loan until the situation gets better. If you decide that this is the option you seek, you can find more information about loans and finances at smarter.loans.
How to pay off existing debt fast
There are a few tips that will help you pay off debt quickly to meet your future financial goals. First of all, you need to make a list of all your debt and try to pay it each month as a whole. Consolidating your debt is a good option as well so that you don’t need to worry about paying separate bills. Until you pay your existing debt, you should avoid accumulating new debt, or the situation may get worse in the long run. You need to set goals for the next year to pay off a certain part of your debt, based on a simple calculus – how much you afford to pay at the end of each month. During such situations, you may want to minimize the amount of money you include in your saving accounts and spend more money on paying off debt. In this situation, needs overcome wants, so you need to reduce your monthly spending. Seeking financial advice from a professional may also help.
You should give the 30-day money challenge a try. This challenge involves participating in activities that don’t require as much money and opting for low-budget variants instead of more expensive ones. Reevaluating goals every now and then is required, along with a new calculus regarding how much debt is left. Depending on how quickly you want to get rid of it, you can set how much money to pay monthly on this goal. Read personal finance books to find more creative ways to improve your financial situation in the meantime and keep in mind that balancing everything out will take some time.