Imagine never having to worry whether or not you can afford something or never experiencing any anxiety when you open a credit card bill. Imagine always having money left over at the end of a pay period and having the confidence that you can retire early. This may all sound like a pipe dream, but you can take charge of your finances starting today. You should try to read some books and web sites about personal financial strategies, but the steps below outline how you can get started.
Know Your Situation
First, you need to know what you have, what you spend and what you owe. This step can seem like a big one, so break it down further to make it easier. Start just by finding an app you like that can track your spending and do that for a few weeks. Next, take a look at your debts and make a list of what they are. Finally, write down how much money you are bringing in after taxes each month. Now you know exactly what you are dealing with, so you can start making a budget.
Cut Your Expenses
Making a budget is only partly about cutting your expenses. In some cases, it might mean cutting back in some places so that you have more to spend in another area. Think of a budget as being more about awareness. However, doing whatever you can to reduce spending is important. This can involve relatively simple steps, like trying to go to movies on cheap nights and cutting out any streaming services or gym memberships you are using. It can also involve bigger lifestyle changes, such as moving to a less expensive apartment or trading in your car for a less costly one. In addition, you can take a look at your regular bills and whether you can cut back there. One way you can reduce monthly expenses is by refinancing your student loan into a new one. Another might be rolling your credit card balance onto a lower interest card.
Eliminate Debt
Next, you need to tackle all debt that isn’t your home mortgage. There’s nothing wrong with having some student loan debt, but you don’t want to be paying it off for the rest of your life, so stay motivated when paying off debt and work on aggressively paying down any money you owe. You may be surprised at how free you feel when you’ve paid off all your debt.
Save and Invest
You need three important types of savings or investments. One is a liquid fund for emergencies that contains a few months of expenses. This should go into a savings account or another easily accessed type of account, such as a money market account. Another is your retirement savings. A third one is for additional savings above and beyond the few months of expenses. Don’t leave this money in the same type of account you’d keep your emergency money in because it won’t keep up with inflation. This third kind is about growing your wealth. Use it to invest in stocks, mutual funds or other vehicles.