No one enjoys worrying about money. Managing your finances can be stressful and can easily consume your entire life if you let it. Regardless of your financial standing or salary, there are things you can do to become financially stable. From automating your bills to living below your means, here are a few tips to help you improve your finances:
1. Track Your Spending
To keep your finances strong, you need to track your spending. Sure, writing down your expenses can be time-consuming but it’s worth it. The more aware you are of your spending habits, the easier it’ll be to identify habits that might hurt your wallet.
Review your budget at least once a month. To make the process easier, categorize your expenses so you can see exactly where your money is going. For example, write down how much of your money is going toward rent and utilities. Then write down how much money is going toward nonessentials (new clothes, eating out, activities, etc.).
Based on this information, you should be able to determine where there’s room to cut costs. For instance, you might notice you’re spending almost $100 a month drinking Starbucks. That’s probably something you could cut from your daily spending.
It’s important to note that you don’t have to track your spending manually. You can choose between several budgeting apps that’ll do the work for you.
2. Consider a Credit Builder Card
Is your credit score low or nonexistent? If so, you’re probably struggling to improve it. After all, to get approved for a credit card, you need a good score. But you can’t have a good score without a credit card. Tricky, isn’t it? Luckily, there’s a solution to help you build credit even with a poor score. It’s called a credit builder card.
These cards typically accept those who struggle with good credit because the card is secured by a funds transfer or initial deposit. These cards work in a similar way as a regular credit card when you use them. As long as you stay within your limit, keep your balance low, and pay it off each month, your score will improve.
Some credit builder cards have high-interest rates, while others don’t charge interest at all. Shop around to see what the best fit is for you and control spending to ensure you don’t accrue debt.
3. Pay Down Your Debt First
Many people in America are plagued by debt. Whether you’re paying down student loans or paying off your car note, you know how stressful owing money is. But there’s good news. There are steps you can put in place to eliminate debt.
For starters, take a good look at the interest rates on your loans. Some may be higher than others. Many financial experts would advise you to focus on paying down those with higher interest rates first. That’s because the higher the rate, the more you end up owing and the longer it takes to pay off.
On the other hand, there’s another option called the snowball method, where you pay smaller balances down first. Once you pay off those cards, you put that amount toward the next card.
The snowball method will probably have a better impact on your mental health. That’s because it’s easier to pay off smaller debts quickly to build momentum. You’ll actually see your debt dwindling (and fewer cards in your wallet) with the snowball method.
4. Automate Your Finances
One of the easiest ways to keep your finances strong is to pay your bills on time, every single time. What some people don’t realize is that a missed payment — even just one — can have a huge impact on their finances. You’ll acquire interest on that late payment, making it harder to pay off and lowering your credit score.
To keep that from happening, make sure you pay your bills on time. Consider setting up auto-pay for your recurring bills. You could also set reminders on your calendar a day or two before your payments are due. There are several ways you can help yourself remember your bills. You just have to find an option that works for you.
5. Have an Emergency Fund
As you’re probably aware, life is unpredictable and can change in an instant. And while you can’t prepare for everything, having an emergency fund can help you stay afloat in the event things go awry. For example, let’s say you get into a car accident and end up totaling your car. Having an emergency fund can help you purchase a new one.
Take the last couple of years as another example. Millions of people lost their jobs due to the COVID-19 pandemic. If something like that were to happen to you, having an emergency fund would be a great help.
Many financial experts suggest you try to save between three to six months of your annual salary. Of course, that number is only a suggestion. Depending on your finances, you might be able to save more money — or you might have to save less.
6. Live Below Your Means
One of the biggest mistakes people make is living beyond their means. They spend more money than they should on things they don’t need, whether that’s their home, car, or new clothes. The truth is, trying to fund an over-the-top lifestyle is a good way to find yourself in debt.
To make sure that doesn’t happen, do your best to live below your means. Even if you can afford certain luxuries, opt out. We’re not saying you can’t splurge every now and then. But if you want to get your finances in control, it’s a good idea to spend less money than you make.
Getting a good handle on your finances isn’t easy. It takes patience and time. But with the tips above, you can become financially stable.