If you are like most people, then getting your finances in order comes as an afterthought. It’s only when you are triggered by a critical life event like the birth of a baby, wedding, or a mortgage application that you prioritize it. But it doesn’t have to be this way.
Having a clear plan on how to use your money is easily the best way to succeed in life. Fortunately, it’s not difficult to keep your personal finances under control, especially if you follow these seven steps.
Table of Contents
Track Your Spending
Keeping track of your spending is the first step to gaining control of your money. Failure to do this will see you end up spending more than you can afford.
The good news is that you can now implement one of the many money tracking applications available in the market today to streamline the process. These apps track everything you are spending on over a set duration, including non-essentials like dining and entertainment. You can then determine what to cut off to save money.
Create a Monthly Budget
When creating a budget, consider how much you earn per month and your monthly spending patterns. The idea is to create a budget that works for you and fits your spending habits and lifestyle. Remember, don’t be too hard on yourself, otherwise it will be difficult to adhere to the budget.
Build Up Your Savings
The unexpected can and do happen, which is why you should put aside an account for emergency purposes. Sure, your earnings might be small, but that should not limit you from setting aside a tiny amount for a rainy day.
Always adopt a culture of saving, such that even in the event of a job loss, you will be able to survive the time even as you look for something else to do.
Pay Your Bills on Time
Everyone has bills to pay, and the best thing you can do is to pay them on time each month. Rent, mortgage, loans and other debts likely top your list.
Paying your bills on time improves your credit score, helps you avoid late fees, and allows you to save money for essential purchases. Most importantly, knowing that your bills have been paid provides you with peace of mind, a valuable commodity in your life.
Take Out Life Insurance
As we said, life is unpredictable and no one can truly tell what tomorrow holds. You could be healthy and fit at one moment and gone in a flash the next minute.
If you have people who depend on you such as your spouse and children, then your absence could spell doom on their futures. Fortunately, you can take out a life insurance policy to guarantee that they will be taken care of financially if the inevitable occurs.
There are various plans you can consider here, including the Whole of Life or Term Life. You can also go for other more specific ones to cover specific risks such as income loss and mortgage repayment.
For example, income protection is a life policy that will provide a regular, tax-free income if you are unable to work due to an illness or accident-related injury.
On the other hand, a mortgage life insurance policy pays out a lump sum amount if you were to pass away within the contract term. Your dependents can then use the proceeds to clear any remaining mortgage amount.
Cut Back on Recurring Charges
Most of us end up signing up for services that we never use. These could range from cable TV to gym and massage services. Some of these subscriptions ask for your bank information, including your debit or credit card information and deduct their amounts automatically monthly.
It’s pretty simple to forget about them, and because they’re monthly recurring costs, they’ll eventually eat into your bank account.
Take some time to audit them and cancel those you don’t use. That money is better channeled elsewhere including to your savings account.
Save Up Cash to Afford Big Purchases
When making large purchases such as houses and cars, it’s very tempting to take loans to make it possible. This is OK in some cases, but have you checked how much interest you are being charged and how long it takes you to get out of that debt?
Where possible, save for these purchases and pay in cash. Your pocket will thank you for it!
Are You Ready To Change Your Financial Habits?
Changing your habits and mentality around money is the first step towards having your personal finances in check. Some of these changes will be simpler to make than others, but if you stay committed to the process, everything is achievable and you can lead the rest of your life as comfortably as possible. We wish you the best of luck!
About Carson Derrow
