Getting your finances in order requires commitment and discipline. It is easier to do if you can look toward the benefits of having a handle on your finances rather than seeing it as an unpleasant task. Watching your debt shrink and savings grow can be a powerful incentive.
To get a handle on your finances, the first step you take is to make a habit of checking on your money. It is very tempting, when things are tight, just to ignore the situation. That does not help anything. Make it a point to spend a few minutes each day looking at your accounts online to make sure there are no surprises or errors.
Build an Emergency Fund
It is impossible to get ahead if you do not have an emergency fund. Eventually, your goal should be enough money to cover your living expenses for up to six months. Initially, however, even having $1000 set aside in a separate savings account is beneficial. Having this money can help keep you from putting unexpected expenses on your credit card, which creates more debt.
Pay Down Debt
There are different types of debt, and it makes sense to have some, while other types you prioritize paying off. If you have credit card debt, the first step is to stop using your cards.
After that, begin paying them off. You can target your card with the highest interest rate, or the one that you owe the least on, or whatever other strategy you find most appealing. Understand that it can take a while to pay off this debt, but stay with it, by not using the card, and making more than the minimum payment.
Student loan debt can feel overwhelming, but there is nothing necessarily bad about it. You used that money to earn a degree, which allows you to hold a job.
However, there is no need to pay more than you need to when repaying these loans. Refinancing your student loans at a more favorable interest rate can allow you to shorten the term of your loan or lower your monthly payment.
Build a Budget You Can Live With
Having a budget allows you to know exactly where your money goes, which is an important part of understanding your finances. It is common to think that a budget is restrictive and boring, so you may want to avoid using one. A budget can be whatever you want it to be. It should include categories for expenses that are frivolous and fun. For a budget to work, it has to be realistic for how you live.
Considering Automating Payments
Late fees can be an unnecessary expense. Additionally, making late payments is a quick way to damage your credit score. Setting up your accounts so that payments are made automatically may take a little time initially, but it ensures that you never miss a payment.
Do not use this as an excuse to avoid looking at your finances. Regular check-ins, as well as reviewing your budget to see what is working and what could use some adjustments, are an important part of managing your finances.
