Painfully Obvious but Extremely Effective Personal Finance Tips
64If you’re struggling with debt or just want to save more money each month, it’s time to take a close look at your finances. Managing your personal finances effectively isn’t always easy but there are some simple habits you can acquire to make the process that much smoother. Taking a proactive approach with money management can help you keep your head above water at all times, and may even stop you from being at the mercy of creditors and debt collectors over the course of your lifetime. Most of the most effective money management and personal finance lessons are painfully obvious, but only some people follow them.
Here are a few painfully obvious but extremely effective personal finance tips you can start using right now:
1. Spend less than you earn. Living within your means continues to be one of the most important personal finance mantras, but why is it so hard for some of us? A simple way to make sure you always spend less than you earn is to spend off a budget or a spending plan. When you “pre-pay” for your expenses on a worksheet, it will become much easier to manage your money. Having a budget or spending plan can also make it much easier to set – and meet – your savings goals.
2. Set up an emergency fund. An emergency fund that is equal to about two or three months’ income will help you get through a rough patch and ensure that you don’t drown in debt if your income sources are temporarily cut off. Start putting away money in an emergency fund so that you always have this financial cushion to count on. This savings account needs to be completely separate from your other savings accounts, and needs to be easily accessible. Don’t put your emergency savings in a CD or an account that you can’t touch for a certain amount of time.
3. Make paying off debt a top priority. Get into the habit of paying off credit cards and loans as quickly as possible. Make paying off debt a top priority so that your monthly minimum payments go down and you also owe less overall. Reducing debts can relieve some financial stress and put you in a much healthier financial position over the long-term.
4. Pay all your bills on time. Make sure you don’t miss a single payment on any of your bills and you’ll avoid late fees and penalties. Some companies do report missed payments on your credit report, so paying bills on time will keep your credit score healthy.
5. Pay your savings account just like another expense. Get into the habit of paying out at least 10% of your earnings each month towards a savings account you don’t plan to touch for several months. Choose a high-yield savings account to maximize the return on your investment and automate the payment if you can. Letting this money build in a savings account with each paycheck will help you save more money than just deciding to save whatever you have left over after expenses.
