The suggestions are simple but the actions are difficult. If you want to make a real change in your finances you will need to take some hard steps. These are just five simple habits you can develop towards a much more stable financial future. This website has many more ways to save.
1. Create a Spending Plan
The first step is to know where the money is going. Collect all of the monthly bills and bank statements and track where every penny went for an entire month. Include the tip for the pizza delivery, the newspaper, and the toll from the weekend day trip. Once everything is listed, it is easier to see where some places could be cut back. Plan for all of the bills that have to be paid. Plan for some fun. And plan for savings.
2. Build an Emergency Fund
There will always be an appliance that dies, a car that needs repair, or a medical bill that wasn't expected. By having a cash cushion, you will be less likely to use a credit card or other type of loan to get you through a tough time. Start small with at least $500 to cover most minor emergencies. Later, build it up to cover several months of expenses in case you lose your job.
3. Pay Off Debt
Car loans, credit cards, student loans and home equity loans all come with large interest rates and keep you from spending that money on other things. They are counted against you when you apply for a mortgage, or have your credit report pulled for a job application. Take any extra money you can to pay the debts off sooner. Some people like to do the smallest first, others like to do the one with the most interest. Regardless of your method, find a way to eliminate the debt as fast as you can.
4. Save for Retirement
Many companies match a certain percent of your pay towards retirement. If the company offers a match on 3 percent of a $30,000 salary, that is like getting an extra $900 a year. Add in the tax benefits of reducing your income and it is a win-win. Every little bit helps and the power of compound interest will allow amounts to grow over time, even in a poor economy. Don't allow a bad economy to be your excuse for putting this off.
5. Decide If This Is a Want or a Need
Can you live a simpler life? Perhaps you can borrow movies and books from the library instead of buying them. Making a home-cooked meal would be healthier and cheaper than eating out. That great shirt that is on sale looks like three you already have in your closet. Taking the time to really consider what is needed and removing the excess will allow you to spend the money on things that you truly enjoy and value instead of just buying another bauble out of habit.
In Conclusion…
Wise doesn't have to be boring. A person can live a full life without personal finance troubles. These steps are not easy and could take many months to achieve, but the financial freedom is well worth it.
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