The cost of living is increasing and the money we earn is no longer stretching as far as it did. The average US worker earns a moderate $1,041 per week, but with living expenses an average of $850 a week, there isn’t a lot left over.
The only way to make sure you don’t end up in debt is to be smart about money management. By learning good habits now, you can avoid problems later, even if your income takes a nosedive for any reason. Read on to learn more.
5 smart tips for managing your finances
To help you effectively manage your finance, we have compiled five tips that you should always use.
Track Your Income and Outgoings
It is impossible to get a handle on your finances if you have no idea what you spend or pay on bills each month. Knowledge is power, so start with your bank statements and credit card bills to see what goes out, how often, and when.
Create a spreadsheet or list of every payment you make. Make a note of your grocery spending, how much you spend on fuel, car expenses, and other regular and non-regular expenses. Don’t forget your tax bill.
This will give you a picture of how much you have going out each month. Next, tally up all your income, including wages, pension payments, dividend income, and any other regular income.
The difference between the two is your disposable income each month.
Create a Budget
Now you know how much money you have left at the end of the month, it is time to make it work a bit harder. Look at how much you spend on essentials and see if you can save money. Allocate money for different things, such as groceries, entertainment, and commuting costs.
Try and stick to your budget instead of splashing out on things you don’t need. The more disciplined you are, the better your finances will be in a few months.
If you are saving up for something big, put aside an affordable sum of money each month into a ring-fenced account, where it won’t be swallowed up by everyday expenses. Do this instead of relying on credit cards or loans. It is far better to wait before making a big-ticket purchase than to end up in more debt.
Focus on paying off your debt before saving. Interest rates are currently quite low, and debt is more costly than any income your savings might generate. Pay off credit cards and loans with the highest interest rates first, then use the additional income you have to pay off any other debt next.
Build Some Passive Income
Where possible, it is useful to build some passive income. There are lots of ways to do this but the main one is via investments. If you invest in the right stocks, you can enjoy a regular income from dividends. Well-known companies like Ford and AT&T pay shareholders dividends of 3% or more, which can be a nice passive income. Research the best stocks for reliable dividends and start an investment portfolio with some of your disposable income. It could be the best investment you ever made.
Build a Savings Pot
Any money left over at the end of the month, after any debt has been cleared, is best channeled into a savings account. Try and build a savings pot that covers a minimum of three months’ income. This ensures you can pay the bills and put food on the table if the worst happens and you can’t work or lose your job.
As you can see, small things can make a huge difference. If you apply the tips we have mentioned above, you can significantly improve your financial situation. Finally, always shop around when making any kind of purchase. Thanks to coupons and discount deals, most things can be bought for less than the ticket price.
- Navigating Child Support Arrears: What You Need to Know - May 12, 2023
- 7 Gaming Security Tips for Parents - April 27, 2023
- The Impact of Stablecoins on the Volatile Crypto Market - April 9, 2023