We all know someone struggling with their finances and we all ourselves sometimes have a hard time managing due to varying life circumstances, so I thought it would be best to share some strategies I use to manage one's finances. These five tips have helped me to be prepared and allow me to understand how to use my dollars better and what the important things are I should be spending on.
Step 1: Create A Budget
Everyone will need a budget of their own at some point in life, as budgeting helps you to think over whatever you purchase and whether it's valuable or invaluable. What I mean in stating this is that with purchases you should always ask yourself "Is this the best deal". A lot of times I see people spend on something without any viable second or third option considerations, the world is majority capitalism so a better deal can always be found in my opinion. Whenever I am about to spend money on a product or service I'll ask myself 3 questions:
How many options have I considered to get the same product or service?
Whether this is the best deal I can get for this product or service?
What is the best price I have been offered for the product or service?.
With your budget try being as detailed as possible and estimating in areas where you are uncertain. The very purpose of budgeting is so you see whether you are profiting, breaking even, or losing money. I've provided a monthly budget spreadsheet here.
Step 2: Consolidate Debt
Consolidating is taking all your debts and combining them so that you can now make one payment that applies to them all. This strategy is commonly used to lower interest rates so that debt repayments can be shortened. With short work, you can find out if consolidating makes sense and saves you cash by utilizing an online debt consolidation calculator.
Step 3: Reduce Or Remove Unnecessary Expenses
Every six months I call all my bills, subscriptions, and so on to inquire upon discounts or different packages that can reduce my bill. Then for all of those billers, I call their competitors in whatever sector they fall into to get the best quotes to see if it would be in my best interest to switch companies. I do this for two reasons, because:
Companies won't call and tell you of a lower price deal that fits your use as they do to get you to upgrade and spend more and,
Incomes generally increase slower than the prices of goods and services meaning you should try saving more and spending less.
If I can reduce a bill, I do it, and if I feel I can get a better deal with another company for the same service I switch. I ask each company for what I'm looking for and ask for freebies, discounts, and quotes. In the end, I compare and go with the company that offers me the best price, not the lowest, as I just want to make sure I get my money's worth and so should you.
Step 4: Have An Emergency Fund
With the emergence of this Covid-19 pandemic this might be an essential and debatably could be higher. I always suggest building up an emergency fund before paying off any outstanding debts because no one knows what the future holds. You should try to attain anywhere from six months to a year of your salary. Your emergency fund can be held at home in a safe, lockbox in cash or a bank account or split between both. I hold cash in a safe and have an account in an online savings offered by companies such as American Express or Capital One where you can earn more interest on your dollars.
Step 5: Put 10 -15% Into A Retirement Account (IRA)
I think we all understand that saving for retirement as soon as possible is very critical in one's wellbeing come the latter part of their career and personal life. There are tons of stats online showing the difference in potential earnings if someone starts sooner rather than later. It's best to just start investing something into retirement now as no one wants to work for the entirety of life. Work sustains us and the world but we must also invest in taking the time to enjoy this world.