Everyone wants to save more or be better with their personal finances, but that’s easier said than done. How do you get your finances on track if you have no idea where to begin? Fortunately, taking control of your money situation is easier than you realize as long as you follow these six tips.
6 Ways to get your personal finances back on track
Create a debt repayment plan
If you’re currently in debt, you need to come up with a debt repayment plan so you have that end goal in sight. One trick is to use the debt avalanche method where you pay down your highest interest debt first. By doing this, you pay less interest in the long run. Alternatively, you could look into a low-interest personal loan to consolidate debt and also save money in the long run.
Start an emergency fund
Having an emergency fund is paramount for your financial health since it’ll give you a buffer in the event you suffer a job loss, health issues, or a financial emergency. Ideally, you want to set aside 3-6 months worth of expenses in an account that you can easily access. If that’s more than you can handle right now, try setting aside $100 a month until you reach your goal. The key is to not touch this money unless it’s for a real emergency, so that means no spendingthis money on a vacation or at that new restaurant in town that everyone has been talking about.
Automate your savings
Instead of saving money whenever you have some money handy, automate your savings by setting up automatic transfers to a savings account every month. By doing this, you’re paying yourself first and ensuring that you’re always saving. If you time the transfers for a day after you get paid, you won’t even notice the money gone from your account. If you’re new to this concept, start with a small monthly amount such as $25 and slowly increase the amount as you get used to your new saving plan.
Cut or reduce some expenses
I know it’s easier said than done, but cutting or reducing your expenses is a great way to get your financial house in order. To begin, start tracking your expenses. Literally, write down everything you spend money on. After a few months of doing this, you’ll start to get a clear picture of where your money is going and you can make small adjustments. For example, if you find that you’re spending too much on Uber or eating out, you can cut back on those expenses and divert the money saved towards other priorities such as paying down debt or building up your emergency fund.
Monitor your credit score and report
What gets measured gets managed. Did you that in a recent study, Borrowell found a correlation between the frequency of credit monitoring and credit score increase over time? The study also found that customers who consistently log in upon receiving their monthly score refresh saw an average increase of 20 points, relative to individuals who did not log in consistently. So be sure to keep an eye on that score!
Set financial goals
Having financial goals is a must since it’ll allow you to start planning and saving accordingly. Let’s say you plan on taking a trip to Italy in a year and it’s going to cost you about $3,000, that means you need to start saving $250 a month now. It doesn’t even need to be a set amount, you could simply say that you’re going to set aside 10% of your income that will go towards a home downpayment or towards your retirement savings. By having these goals, you’ll be encouraged to work (and save) towards them.
Getting your finances on track isn’t something that happens overnight, so you shouldn’t feel bad if things are taking longer than expected. Stick to a plan and always educate yourself about your finances so you’ll feel better about managing your money.
About The Author
Barry Choi is a personal finance and travel expert based in Toronto who makes frequent media appearances in Canada and the US. You can read more of his work at moneywehave.com or follow him on Twitter: @barrychoi