Living financially free is what most people want. Even if you’re not independently wealthy, not having to worry having enough money makes life a whole lot easier. But when it comes to reaching this point in life, the road isn’t always easy. In between recessions and inflation, making your money work for you requires a strategy that will grow with you. It may sound complicated but it doesn’t need to be. Below are five easy ways to take control of your finances.
1. Outline Your Financial Goals
Keeping your finances in order is an ongoing process. At any age, you need to evaluate and then re-evaluate as your revenue ebbs and flows. You also need to create immediate goals and long-term ones as well. If you’re a college student just staring out, your goals will be different than when you’re in your thirties or forties. The same holds true for those who are already middle age and want to save more for retirement. Write down all of your goals, so you have a better idea of what you need to do. Look at your current money stream to determine whether you can reach your goals without struggling. If you’re not earning enough money to do so, then you have a couple of options. You can take on a part-time job to earn more, or you can find ways to scale back. Either way, you need to create a budget that includes your current earnings and any additional earnings you project in the future.
2. Create a Realistic Budget
While budgeting is not one of most interesting of topics, it’s definitely important. One of the worst business mistakes you can make is not properly budgeting and you should consider your personal financial goals just like a business. No matter how old you are, you need to learn how to manage your money and make it work for you. That means creating a realistic budget that you know is doable, even if you earn less money here or there. The first thing you need to do is analyze your cash flow. Do you get paid once a month, bi-weekly or weekly? You then need to lay your bills out in front of you and determine two things: if you’re earning enough and if the money you do earn is coming in at the right time of the month. Oftentimes, your deposits don’t line up with you withdraws, which can make managing your money stressful.
If this is the case, you need to see if you can change the payment due dates of your expenses. That way, you’ll have a clearer picture of when you need to have more disposable income. If you’re not sure how to go about this, you can try the 50/30/20 model. With this strategy, you need to put 50 percent of your after-tax income towards essentials. These expenses include housing, car and food costs. Then next 30 percent should be applied towards needed essentials like your internet and cable service. The remaining 20 percent is considered your mad money. You can use this any way you like, as long as you don’t over budget.
3. Start an Emergency Fund
You probably already know how important an emergency fund is, however, you might not know how much to save every month. You need to see how much money you have left after everything is paid at the end of the month. This also includes your spending money, unless you choose to save this amount instead. At the very least, you need to shoot for three months of total expenses tucked away in case you need it.
4. Assess Outside Financial Sources
If you’ve been paying into a life insurance policy, you could consider getting a life insurance settlement. Depending on the type of policy you have, you may be able to cash it in for a lump sum. It’s important to note that if you do choose to sell, you might have to pay taxes on the money. For this reason, you should do your due diligence and research life settlement taxation. You need to understand the complexity of selling your policy prior to moving forward. You can also enlist the help of an attorney or financial advisor to help you make a final decision.
5. Pay Off Your Credit Cards
Depending on your overall credit, you may or may not have the greatest interest on your credit cards. If you do have high interest rates, paying off your balance may seem impossible. To get your credit card debt under control, you have several options. You can reach out to your lender and see if you qualify for a lower interest rate. You can also start paying your cards off one by one. Some choose to pay off the smaller ones first before moving onto ones with higher balances. Alternatively, you can start paying more on cards with higher balances to decrease how much interest is applied. You can also pay on these cards throughout the month as well. The goal is to pay as much as possible without going over budget.