224 Shares
Generally, people are lacking a thorough personal finance education. Many young people today haven’t learned how to budget, balance a checking account, or file taxes. This is the second generation of individuals taking out substantial student loans, creating a broader gap in socioeconomic classes each year.
It’s our responsibility to step up and fill the gaps in our financial education. Where do we start? To get a good handle on our financial security, we should begin with a clear understanding of what we have and where our money goes. Then we can break down the steps to secure financial stability and save money for bigger goals.Here’s a guide to help you feel more in control of your personal finances.
1. Start budgeting
At its core, budgeting is how we will find security in our finances. Knowing where your money is going and how much you’re spending on the things in your life will give you a clearer view of where you can tighten up your budget and save money.
Surplus spending
There are many ways to track your spending, but often people find that linking an app to their banking platform to track money movement is the easiest option. Whether you use an app or save your receipts by inputting them into a spreadsheet at the end of the day, chances are that you’ll discover significant spending in places you didn’t consider. This is often called nickel-and-dimming your budget.
For example, many people buy coffee or lunch daily while running errands or at work. As insignificant as it may seem, this is a majorly overlooked expenditure for many. $5 here or there doesn’t seem like a big deal, but when you spend $5 on coffee five days a week, you’ve dropped over $1000 on coffee by the end of the year.
Review your spending
Looking at your budget with free online calculators is the perfect opportunity to review your spending and look for better deals. With things like insurance and phone payments, you’re supposed to check them annually to see if there are any better rates you can take advantage of. Reviewing your budget should happen, at the very least, every six months. This way, you can look at little spending and figure out how it all adds up. The average American spends over $200 on subscription services, often without realizing it.
When you find bills you forgot about or simply didn’t use the services, you should take the time to call customer service. You can easily cancel or adjust your subscription or ask customer service about a better rate by bundling with other subscriptions.
For example, if you pay for Amazon Prime, you can bundle many of your subscription services for streaming services like Starz and HBOMax with your Prime membership for a reduced rate. Some phone plans also offer streaming services as part of your phone plan.
2. Reduce debt
It’s nearly impossible to make it through life without getting into debt. We need a healthy level of revolving debt to build our credit for cars and houses. You can partner with a financial advisor to determine the best way to regain control of your finances.
Methods of debt reduction
There are many methods of debt reduction you can consider. Each option has pros and cons and takes dedication and discipline in your money management skills. Getting out of debt isn’t easy unless you’re lucky enough to come into a large sum of money from an inheritance or a lottery win.
- Snowball Method: Pay your debtors focusing on your lowest loan; make the minimum payment you can on more significant debts while you focus on the small bits first. You then move that funding to your next most minor, paying the minimum plus this additional amount. As you pay off more debts, you have more funds to throw at more enormous debts.
- Debt Avalance: This is precisely the opposite of the snowball. In this debt reduction method, you’ll pay the bare minimum on the lower balances and lower interest rates to focus your monetary contributions on paying your more significant debts off first. Then as you pay off debts, you’ll have less interest building up and contributing to your continued debt.
- Debt Consolidation: For many people, the primary struggle they have in paying down debt is remembering the multiple payments or feeling overwhelmed by the total of all of them. Consolidating your debts can help you by reducing the monthly payments and the overall interest rate for your debt payments. This option works well for some but can be dangerous as not all debt consolidation agencies are reputable. Make sure you look closely at reviews and ask for referrals from your friends, family, and financial advisor before you sign any contracts.
3. Improve your credit score
Your credit score is one of the major deciding factors in taking out a loan for a car, a home, or even some education programs. Most trade schools don’t accept typical education loans, so you must be in a place to qualify for a personal loan to pay for the program.This makes credit scores an important aspect of personal finance.
For many, their credit score is just a number. Our outlook on long-term financial security has become dangerously damaged, and that hopelessness makes it challenging to take the reigns in our economic success.
Taking an active role in re-educating yourself to make more sustainable financial choices is the first step in finding the silver lining and breaking generational finance habits. While you’re taking steps to pay down debt and improve your credit score, you can maintain that upward momentum by being hyper-vigilant with your spending and researching your investments before you jump on them.
4. Prioritize quality
From a personal finance standpoint, spending more initially is a better choice if the product will last longer than a cheaper equivalent bought several times over. Purchasing cheap boots may keep your feet dry today, and tomorrow, but you’ll replace them in a month or two. If you save your funds and get a pair of boots that costs twice the amount but last several years, you’ve saved a significant amount of money.
The same concept proves accurate across the board. If you spend more on a car known to be reliable, fuel-efficient, and safe, you’ll spend less over the long term by avoiding excessive fill-ups, repairs, and high insurance rates. Similarly, with real estate, if you rent a home from another person, you’re paying their mortgage without adding any equity to your assets. If you can buy a home, you may spend more per month, but when push comes to shove, you have an investment with liquid equity.
5. Protect your assets
Investing in assets, such as real property or cars, can help you raise your equity value. Still, if you don’t put layers of additional protection on those assets, you’re not doing what you need to ensure the money is available when you need it. Additionally, adding extended warranties or insurance policies can help you prevent needing to break your budget on repairs or maintenance.
For example, when you buy a new car, it typically comes with a manufacturer’s warranty. It loses a significant monetary value through depreciation in the first year off of the assembly line. Suppose you choose to invest in a slightly older model. In that case, it’s already experienced its devaluation, and you can invest in an extended warranty to cover major breakdowns and repairs while still maintaining the reliability and integrity of the car. To learn more about how extended warranties can help protect your wheeled assets, take some time to read up on CarShield reviews will give you a lot of information about the process and the benefits of this option.
6. Create a safety net
No matter how stable and reliable your financial budgeting has become, you can never plan for the unexpected. Most Americans are a few emergencies from bankruptcy, even when they appear to have it all together.
While you’re working to pay off your debts, reduce your monthly spending, and increase your credit score, it’s a good idea to focus on putting aside some funds from each payday for an emergency account. This allows for a cushion in case an unexpected expense comes up.
Improve your personal finances now
Learning the basics of personal finance is an important first step in gaining control of your financial life. Now that you’ve learned the top most important things to consider, start applying these tips to your real life. There are also many other resources out there to continue learning about finances. This includes blogs, websites, and podcasts about personal finance. Take your financial security into your own hands and share with future generations how to be financially secure.
Additional articles you might be interested in:
- How To Get Started Blogging About Crypto And Make A Profit
- 8 Easy Ways To Boost Your Personal Finance
- 7 Things You Must Know About Cryptocurrency
- 6 Easy Steps To Improve Your Financial Life As A Woman
- 8 Easy Ways To Boost Your Personal Finance
- 4 Helpful Tips For Thinking About Your Retirement Finances
- 5 Strategies Used By Successful Women Entrepreneurs To Save For Retirement
- How Credit History And Credit Age Impact Your Credit Score
- How To Get Your Credit Card Debt Under Control
- 5 Ways To Improve Bad Credit
- 4 Reasons Why You Should Outsource Your Finances
- How To Take Charge of Your Finances: Online Loans Explained
- Top Factors That Will Get You A Loan Now
- How To Establish Your Credit Score For Quick Cash Loans
- How To Save Money When Taking Out A Title Loan
- 7 Common Mistakes Everyone Makes In Online Loans With Monthly Payments
- 4 Ways To Make Money When Business Is Slow
- 5 Best Ways To Invest Your Money
- 3 Investment Tips For Millennials From Experienced Traders
- How To Engage Your Target Audience
- 10 Ways To Organize And Plan Your Blog Posts
- Why You Need A Catchy Blog Name To Be Successful
- 5 Ways To Create More Income From Content
- 11 Tips On How To Get Blog Traffic Using SEO
Alaine Meier is a blogger at LadyBossBlogger. She graduated from the College of the Holy Cross with a BA in Economics and a minor in Environmental Studies.
Related
224 Shares
