Do you always find yourself struggling with making ends meet? Are you living paycheck to paycheck despite having a relatively good income? You’re probably bad at managing your finances. Bad money management is the last thing you want if you want to get your finances in order. But don’t worry, there’s still hope for you and for everyone else struggling with money. It may not happen overnight, it may take time but you can learn how to manage your money and take control of your finances.
Here are the fundamentals to get started with better financial management in 6 easy steps.
Create a budget
Creating a budget is one of the first steps to take if you want to be in control of your money. If you haven’t done it yet, now is the best time to do it. Many people refuse to do budgeting because they don’t want to go through the boring process of making a list of their daily, weekly and monthly expenses. However, if you’re bad at managing your money, then this step is very important.
Creating a budget doesn’t have to be complicated. All you need to do is to keep track of the things you spend for so that you have visibility over where your money goes. Understanding your expenses is key to managing your finances.
Stick to your budget
Budgeting would be useless if you don’t use your budget to control your spending. Use it to guide you purchasing decisions. Refer to it as often as possible so that you always have an idea about how much you’re supposed to spend daily.
Calculate your discretionary income
Understanding your income means more than just knowing how much you make every month. For most people this is relatively fixed. A more useful figure is your discretionary income.
To figure that, subtract your expenses from your salary and see if you’ll end up with a positive or negative number.
A positive number means that you spend less than you earn and you still have some room to increase your savings or increase debt payments. A negative number, on the other hand, means that you spend more than you make and it’s time that you take a look at your spending and find ways to reduce it.
Eliminate unnecessary expenses
Does your daily routine include dropping by Starbucks to get a cup of coffee on your way to work? Or are you paying for an expensive gym membership you’re not even able to use because you still do home workouts, anyway? Are these things really important? Something you can’t live without? If not, it’s time to cancel these subscriptions and eliminate unnecessary expenses or look for cheaper alternatives.
Instead of getting a cup of joe at a hefty price, why don’t you make your own brew before leaving for work? Take every penny, every dollar into account and avoid spending for the things that aren’t really important.
See how much you’ll be able to save in the long run.
Avoid committing to new recurring bills
So your income and credit standing qualifies you to take out a loan or avail of a new credit line? That doesn’t mean that you should. It’s still important to go back to whether or those new debt payments will fit into your monthly budget. After all, financial institutions approve based on the income reported to them. It’s more difficult for them to tell if you have other obligations that could potentially prevent you from making on-time payments.
Limit your credit card purchases
Remember that credit cards aren’t an extension of your wallet. It’s true that they’re helpful financial tools when you get caught in an emergency or run out of cash. However, the bills are going to haunt you sooner or later. When making purchases, always think about whether or not you can afford to pay the balance.
Being good with managing your money isn’t a skill you can master overnight. But by adopting healthy financial habits, you’ll be able to make smarter decisions and take control of your finances for the better.
Because saving is another excellent way to manage your money, it’s important to choose the right place that will help you grow your savings – Calcite Credit Union. Give us a call and let us help you navigate the road to financial freedom.