Estimated reading time: 3 mins
Sometimes, managing your money more effectively is simply a matter of changing certain habits. Let’s take a look at some of the most common things people do to keep their finances in order.
Maintain an Awareness of Your Finances
You have to know where you are to get to where you want to go — otherwise you have no frame of reference. If you have yet to do so, it’s time to sit down and create your balance sheet.
List all of your debts and expenses in a column on one side of the sheet. List all of your income sources on the other. Total both columns and you’ll see how much more you have in one than the other.
If the sum of the first column is higher than that of the second column, you’ve got some soul searching to do. However, even if the second column’s total is higher, there’s some work you need to do as well.
Draft a Spending Plan
Some people say budget, we say spending plan. After all, you have to plan your expenditures to manage your money effectively. First things first, go back over that list of debts and expenses and look for ways to free up some cash.
Look for things on which you’re spending and getting little or nothing in return. Those are the first things to cut. Maybe you have streaming subscriptions without which you can live. On the other hand, consider streaming if you’re paying a huge cable bill every month.
Developing a balanced spending plan is one of the fundamental elements of managing your money more effectively. Give every dollar a job and make sure it’s used for that purpose.
Within that, it’s important to leave some discretionary dollars in your plan, regardless of your situation. Living just to pay the bills is a surefire way to make yourself abandon your plan.
Create an Emergency Fund
If you have yet to do so, the first savings account you create should be one to hold the money you’ll need to have on hand should your job go away suddenly or you’re faced with a significant expense such as an unexpected appliance or car repair.
Experts recommend setting aside at least six months of your household expenses to tide you over in such circumstances. This could save you from having to go into debt to solve a financial problem.
Pay Off Your Credit Card Debt
Carrying credit card balances from month to month robs you of cash you could be saving toward something to which you can look forward. Whether that’s your retirement fund, a vacation or whatever, the sooner you eradicate your credit card debt, the closer you’ll be to reaching that goal. It might even be worth doing a credit card consolidation to a zero percent offer to help you pay it off sooner.
Keep Credit Card Purchases to a Minimum
If you must buy something with a credit card, do everything possible to pay it off before the grace period ends and you’re hit with interest charges. Even if you can’t pay it in full, pay as much as you can to make the interest charge as small as possible.
The best way to accomplish this is to plan big purchases beforehand, shop for the best possible price and save the money so you can pay cash for the item. This helps you avoid interest charges and gives you time to determine whether that item is really a need or just a want.
Auto-Pay Recurring Expenses
You know you’re going to have to pay your mortgage/rent each month. Ditto your utilities and other necessities. The holders of those debts will often agree to discounts if you set them up to auto-pay.
However, even if they won’t, you’ll have the peace of mind of knowing those bills won’t slip through the cracks and get overlooked, which can trigger penalties, fees and interest rate increases. Incorporating these six habits into your financial dealings will carry you a long way toward managing your money more effectively.