To get ahead in life and become financially independent in the future, you need to start taking steps right now that you can benefit from later on. The first and foremost step that you need to take is to improve the way you manage your personal finances and get them organized in a better way which would save you time.
Although in the beginning, it might be a little overwhelming and even intimidating, once you learn, are determined, and develop confidence getting on top of the management of your personal finances will be easy. Each step you take on the way will prove to be worth the stress that you took back then.
In this blog, we have highlighted few of the most effective suggestions and strategies that would help organize your personal finances, spare you the stress, save you time, and increase your disposable income better than before. Let’s get started on this journey today.
Automatically Save a Specific Amount or Percentage of Your Income Before Spending
You need to set concrete goals in order to save some amount each month. You need to deliberately adjust your expenses in order to achieve the set savings goal. It is necessary for you to set a certain percentage of your income as savings every month without excuse.
After doing so, calculate and allocate money for your spending based on what is left and finally deal with your outgoings. It will be helpful if you link your savings account with your salary account or your checking account by automating X% of your income to directly transfer to the saving account once your salary is credited to your account.
Increase Your Savings Rate Each Year
Increasing your savings return each year by a certain percentage that is higher than the previous one would deliver a favorable return for what’s usually only a small investment of effort.
- If you are an employee and contribute to your company-sponsored pension or retirement plan (usually the 401k) but haven’t been able to contribute the maximum amount, simply increase the percentage contribution to the plan.
- If you are already contributing the maximum amount then the other option that you could avail is to contribute to an IRA.
- If you are already following the aforementioned ways and have your retirement buckets filled to the brim, then allocate a certain portion as a contribution to a savings account that is taxable.
- Increasing your savings as such will not only boost your net worth but also improve your overall financial health.
One tip that many experts suggest and follow is to keep track of the dollar amount you saved in a year and compare it to last year’s savings, to notice if you have been successful in achieving better.
Track Your Expenses
In order to track your expenses, create a spending plan that allows you to categorize and record every purchase and transaction that you made each month. This would help you determine and measure how much you usually spend in a month and will allow you to better calculate your monthly spending rate. By doing so the saying ‘What gets measured, gets managed’ will become a reality in your case.
This will help you follow a controlled procedure when you spend money that will restrain you from buying something that is not important to you, motivating you to spend your money somewhere it actually needs to go.
Establish an Emergency Fund for Yourself
You must have heard the idiom ‘Save something for the rainy day’. Well, that is exactly what we recommend you to do. Even though you might not be much of a saver, and don’t contribute the maximum amount as often as you should, it is recommended to keep at least a certain amount of money in a separate account to can cover your living expenses for at least three months.
This is absolutely necessary in order to deal with unforeseen events or should a calamity strike. It could be some health issue, mortgage, or some other similar situation. This extra (saved) money could help you in such situations and will provide you priceless peace of mind.
These emergency savings would also save you from the hassle of resorting to take emergency loans and bear the punishing interest rates that come with it.
Make a List and Actively Look for Discounts and Sales When Shopping
Write down all your necessities and groceries and make a list of the items that you need to buy in the current month. This will help you come up with an estimated figure for you to spend while shopping. It also allows you to understand what is more important as you stick to your list and refrain from indulging in momentary whims at the supermarkets that are sure to make you spend impulsively.
Also, while shopping, keep an eye out for items that are on sale or are available at a discounted price. It is always better to shop for fruits and vegetables that are seasonal rather than the out-of-season ones.
Try Organizing Your Debt with Debt Snowball Method
This method is extremely effective if you intend to pay off your loans quickly using a one-by-one approach. For this, you simply need to take a piece of paper and pen and list down all the loans that you have until now. Then place them in an increasing order from smallest to largest. Now start paying off those loans that are smaller and would require less time before they are completely paid off. This would help you relieve yourself of the worry of paying off so many loans and now you can put that extra money towards paying off the next loan hence leading it to a debt snowball method which is going to build its momentum with time.
Following these suggestions would help you understand your average monthly or annual spending and will make it easier for you to successfully reach the financial milestones that you have set for yourself.