Most people are “winging it” when it comes to their personal finances. Although the value of money is undoubtedly high, many have trouble managing it. One in four Americans have more credit card debt than emergency savings. More people are concerned about paying for their vacation than saving up for retirement. And yet, most Americans refuse financial advice or help.
If you find yourself building up debt or living paycheck-to-paycheck, revisit your financial habits before it’s too late.
Here are five tips for managing your finances so you don’t let your money slip away.
Create a budget
A majority of people who have a lot of debts, live paycheck-to-paycheck, or do not have any savings tend to spend their money on things that they don’t need. A budget may help you avoid a similar situation.
If you know where your money’s going or where it has to go, you’ll have better control of your spending and identify opportunities for saving. The beauty of budgeting is that you don’t need to be a whiz at math; you just need time to figure out how to divide your income. Figure out which expenses occur monthly, quarterly and yearly.
Once you do, you must follow it. Otherwise, you could find yourself in financial trouble.
Improve your credit score
Your credit score determines what products you’ll qualify for, from a personal loan to a credit card. To reach a good score, typically over 600, means lower interest rates and better terms on those products. Fortunately, it’s now easier to check your credit report from one of the many websites that offer this service for free.
Once you have all the information, you can work on improving your credit score by making monthly payments on time and only taking out loan offers that will not give you a difficult time paying back.
A good way to keep track of how you are doing with your credit score is to check in a couple of times a year. You can even set up a reminder on your phone so that you don’t forget about it. This way, you will be able to see exactly where you stand and how much progress you have made.
Learn more about loan options
When it comes to loans, you might think that simply going to a regular mortgage lender can give you the options you need. But you might not know that there are a number of lenders out there who can give you more options than this. For example, some lenders offer student loans on the side, which is great for those looking to fund their education without having to resort to using federal loans.
And if you are eyeing a property in an affluent part of town, you might not even have to go to a regular mortgage lender. Depending on the bank and the amount of money you are planning to borrow, you can choose from other options such as hard money loans or jumbo loans. All of these different loan opportunities out there can be very difficult to find if you were only looking for one particular type of loan.
Build an emergency fund
Building an emergency fund is a very important step in managing your finances. This is because it will help you to have savings when you need them the most, without having to resort to using credit cards or loans. In this case, you can use the money in your emergency fund for things such as medical expenses, home repairs, and any other type of unexpected expenses.
To start building your emergency fund, you first have to set up a way to accumulate the money that you will put into it. If you suddenly face a life-changing illness and are in need of financial support, you also have the option of a viatical settlement. This allows you to sell your life insurance policy for a cash payout that will help pay off medical bills. When you have some money saved up, this is when it’s time to start thinking about how much of an emergency fund do you actually need.
Manage Your Money Better
How you handle your money today will determine your financial future. If you have kids, better money management will teach them about financial priorities. Teach your kids financial literacy early on, and you lead the way for them to practice self-control, investing and saving.
Done right and with consistency, money management means your financial security doesn’t have to depend on having more money. But you must start today.