Money management is a task many adults—including professionals—struggle with. Fortunately, there are simple ways you can stay on track. With a few tweaks to your financial habits, plus some effective tools, you’ll be out of the red in no time.
Know Your Weaknesses
Whether it’s going out with friends or a daily latte that’s breaking your budget, know your weaknesses. Once you identify where you’re overspending, it’s easier to address the issue.
Of course, you don’t have to completely give up everything in life that you love. But swapping a few coffees per week for ones made at home and staying in with friends can help curb excess spending.
Track Your Spending
Do you know exactly how much money you spend each month? Or how about how much is coming in? The first step toward getting on track financially is having a solid understanding of what you’re working with.
Track your expenses for a month (or longer) to get an idea of your averages. You can track your spending by saving receipts, using a tracking app, or reviewing your bank statement at the end of the month. Then, proceed with setting a budget that works with those figures.
Set a (Realistic) Budget
Setting—and sticking to—a budget might be the biggest challenge when it comes to staying on track financially, but creating a budget helps you see where your money is going and allows you to plan for your future. Experts recommend spending no more than 35 per cent of your income on housing, and you’ll need to factor in other expenses like transportation, food, insurance, utilities, and personal spending, too.
But each person’s percentages will vary, which means what’s realistic for you may be vastly different than what experts recommend.
Download Financial Apps to Keep Up
Apps like Mint help you budget and track your spending on both iPhone and Android smartphones (there’s a browser option, too). Another useful tool is YNAB—You Need a Budget—which promises to help get you out of debt with smart spending (and saving) strategies.
Prepare for Retirement
Apart from your savings account for unforeseen expenses, you should also save for retirement, by your 30s, you should have a year’s worth of salary set aside for retirement, and the amount increases to three times your current income by your 40s.
Of course, those figures factor in your employer matching, too, which typically amounts to about 4.5 per cent.
Be Strategic About Credit
Having good credit enables you to get lower interest rates on vehicles, mortgages, and credit cards. But it can also affect your ability to rent a home. Your credit score matters because it’s an indicator of how big of a risk you pose to lenders.
In general, you can maintain good credit by paying your debts on time, not running up credit cards, and keeping accounts open and current. But if you have a low credit score already, raising it can take work.
To improve your score, Experian recommends keeping old accounts open and only opening new accounts or credit cards when absolutely necessary.
Dealing with finances can be challenging, especially when the term “budgeting” inspires negative connotations. But with these simple financial steps, you can set out on a path toward solvency with little to no pain involved.
Article contributed by Christopher Haymon, creator of Auditing Digest