If you feel overwhelmed by your finances, you’re certainly not alone! Statistics show show that many of us are surprised by our bills and approximately nine person of our income on interest payments every year. Research also indicates that the majority of Amercans don’t have long-term financial goals or savings for emergency expenses. It’s not surprising then, that nearly 50 percent of Americans are concerned about their financial wellbeing!
The good news, though, is that getting on track financially is possible. Developing a financial plan can help you simplify your income and expenses—and make managing them as seamless as possible.
It all starts with a plan. With this in mind, here’s a look at some time-tested tips that you can use to organize your finances.
Consider Your Long-Term Goals
Putting your long-term goals down onto paper is the best first-step in creating financial order. Think carefully for a minute about your goals. Do you hope to buy a house in a few years? Would you like to start a business or a side venture? Travel the world? Saving and working towards a goal is much easier than simply saving for an unknown reason. If you are visually motivated, you might even consider building a visual board or savings progress thermometer to keep it real.
Create a Budget
Next, it’s time to make a budget. Most people dread the idea of a budget because it conjures up images of a restrictive plan that will limit their enjoyment of life. But when done properly, a budget isn’t something that’s designed to destroy your good times, instead, it’s a tool that will put you in charge of your finances; which is a place that we all want to be. A budget simply maps out your spending from the month, and enables you to create a spending plan so you know exactly what’s going where. From there, you can make informed decisions on your income and expenses, allocating funds as-needed to different areas. In the end, you’ll get a clear picture of your income and outgoings, and will be able to know at a glance, where your money’s going.
Try to Save Up
We all would like to spend less and save more, but being able to follow through with this is another story. According to NerdWallet, our increasing indebtedness is due to the fact that cost of living consistently outpaces income growth. While household income levels have increased by 28 percent in the past 13 years, the cost of living increased by 30 percent. This, of course, means that it’s increasingly difficult to save.
To help combat this, consider making small changes in your life to help pad your savings account a little more each month. Start small, cancel subscriptions you don’t use, pack a lunch instead of eating out, or think of budget-friendly ways to enjoy time with friends. Regardless of how small or how large these savings may be, be sure to direct that money that you would have otherwise spent into your savings accounts. Or, better yet, set up a recurring payment to automatically transfer into your savings account from your checking after you get paid. You’ll be surprised at how quickly it adds up!
Pay Down Debt
With the average American credit card debt totaling to $16,245, there’s a good chance that most of us could stand to pay down some of our debt. If you feel that debt is looming over your life, and would like to see that balance get lower, there’s a lot that you can do to maximize your strategy. First, try to get rid of any credit cards with a high-interest rate by prioritizing paying them off first. Or, consider paying off the smaller debts in-full first, then snowballing the extra money that you’ll have into tackling larger debts. This doesn’t mean you have to go without, or sacrifice important things, but it just means being conscious about what you’re spending, and why.
Finally, it’s important to avoid falling into the guilt trap, where we berate ourselves for having credit card debt or not as much as you hoped in your savings account. Instead, it’s far better to ensure that you plan and budget from a place of positivity. The best approach by far isn’t punishing yourself by denying enjoyable little purchases that bring you happiness or avoiding spending time with friends because going out involves money. Instead, it’s about setting goals, and choosing how you spend your money, consciously.
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Getting organized is challenging, and finances can be too! But at the end of the day, gaining control of your finances is a task that’s worth doing. Being in the driver’s seat will give you a tremendous sense of freedom and empower you to reach those big-picture goals that would otherwise have only been dreams. In the end, it’ll make you happier, help you feel less stress, and enable you to go about your daily life without the constant pressure of finances. Remember: it’s all about taking steps, even small steps, in the right direction; and consciously working towards achieving your goals.
In our blog series this month we’ll be looking at tips to getting organized, and outlining steps that you can follow to bring order into different areas of your life. If you’d like to make this the season for change, then be sure to stay tuned for upcoming posts!