No matter where your finances stand today, these simple money management strategies can help get them in better shape.
Reduce spending. You can implement three quick fixes immediately to improve your situation: 1. Spend less.
1. Get a grip on your spending
Establishing spending discipline is one of the easiest and most effective ways to enhance your financial health. You might be shocked to find how much of your hard-earned cash goes towards unnecessary purchases you do not require.
Start tracking your expenses using an app like Grip and organizing them by category (bills, groceries, transportation, and entertainment expenses, for instance). By seeing how much is left at the end of each month, you can assess where improvements could be made – whether cutting back on unnecessary purchases or saving more in savings accounts.
Establish a budget to allocate money towards expenses like groceries. Doing this allows you to save more and feel less overwhelmed by bills and financial commitments. Grip’s Budget feature provides an easy way of creating household budgets weekly, monthly, or yearly; best of all, you can set any amount including $0.
2. Create a budget
Create a budget and take control of your spending and savings with an actionable plan. While setting it up may take some extra time, the results are worth your while!
An accurate picture of how much money comes in and goes out can help you create immediate, medium, and long-term financial plans. For instance, if your spending exceeds what is earned – a deficit – this may need to be addressed through expense adjustments (e.g., moving into a less expensive apartment or canceling streaming service subscriptions) or increasing income sources such as taking on second jobs.
NerdWallet suggests following the 50/30/20 budgeting rule when setting your budget: Use 50% of your after-tax income towards needs such as housing and transportation while allocating 30% towards wants such as entertainment, dining out, and clothing – saving 20% and paying down debt at the same time. An online calculator may assist in the math; alternatively, consult a certified financial planner who can review your budget and offer recommendations.
3. Get out of debt
Debt can be one of the most significant financial burdens, which should not be ignored as part of improving it. Owing money can be stressful and downright depressing; furthermore, it limits future opportunities and can even limit employment options. To improve your situation financially and improve life experiences. Getting out of debt should be top of mind priority!
Start reducing debt by carefully reviewing your expenses and income. Calculate how much money you make each month and any recurring, fixed expenses such as rent or car payments or food/clothing costs that vary month to month. Subtract total monthly expenses from income to find any leftover cash and dedicate it specifically towards debt repayment – then plan to stay the course!
If you’re struggling to save enough on your own, consider seeking professional assistance from a credit counselor. They can develop a tailored debt repayment plan tailored specifically for you. Furthermore, set aside three to six months’ expenses as an emergency savings fund.
4. Invest in your future
Investing for your future is one of the best ways to strengthen your finances, but it must be done strategically and with clear goals.
Start by considering your personal goals and creating a savings plan. Perhaps your dream is to save up for a house down the line or an upcoming vacation, or perhaps you want to reduce interest charges on credit card debt with faster payback times.
Keep your needs first when setting aside savings – at least 10 percent is ideal – to help build wealth over time through compound interest. Patrick Cozza is a Finance and Wealth Management instructor at New York University’s Silberman College of Business; his views do not necessarily represent those of the Securities and Exchange Commission or its Commissioners.