Many people earn a good salary and have little or nothing to show for it. Poor money management can lead to a lifetime of doing without. The good news is that you can enjoy a bright financial future and live well today.
In order to achieve financial stability, you need to create a household budget. It’s easy to do. If you don’t know where to start, there are free worksheets available online that you can print. A budget is very revealing with regard to your spending habits. It will identify areas of weakness, helping you to reduce waste. It also lets you achieve short-term and long-term goals.
Why a Budget Matters
Without a budget, you may end up living paycheck to paycheck. This happens when you have no plan in place so you assume the money in the bank is yours. Without reserves available, a minor repair costing a few hundred dollars can cost you to lose your good credit standing by using bill money to pay for it.
Tackling the Debt
Reducing your debt is essential to sustaining financial wealth. Unfortunately, it’s much easier to create debt than it is to eliminate it. Thankfully, you do have a few options. If you own a home, making the decision to refinance mortgage loans is an option if you have equity. This will give you cash at the closing that you can use to pay off credit cards, car loans, and other debt. If you don’t own a home or have equity, you can start by paying off credit cards one at a time.
Most people use debit cards. Unfortunately, you’re not truly seeing the amount you spend. Instead, start using cash. Give yourself a weekly allowance and use that to pay for things like your morning coffee, lunch, and personal items. This will prevent you from using your checking account. That you should reserve to pay bills and cover unexpected expenses.
The Wants Versus the Needs
Distinguishing between wants and needs will help you accumulate money and enjoy a bright financial future. The needs are things such as a roof over your head and food on the table. The wants can include a new car, a surround system, and everything else. Having the mindset that you must have something and using the reasoning you deserve it, which you may, is only going to contribute to existing debt. Instead, a better approach is to figure out the cost and then save up for it. You won’t add any additional debt and you’ll avoid interest.
Having bad credit is not something you want, ever. It will cost you more to buy a home, a car, and secure a line of credit. It will also prevent you from getting approval for an apartment or rental property and cost you added money to turn on utilities. Thankfully, you can raise your credit score, however, it’s not a quick fix. Reducing debt and paying your bills on time will make the numbers go up slowly. If you have a poor credit score, it’s wise to start now to reverse it.
Funding Your Retirement
The hard fact is that if you rely on Social Security as the only source of income for your retirement, you won’t be able to enjoy it. You will need other sources of income. Many people have a 401k through their employer. However, if you are an independent contractor, you won’t have that in place. Having savings for retirement is essential to experiencing a good quality of life. Opening a traditional or a Roth IRA or a 401k is in your best interest.
Learning how to manage money will help you achieve both your short-term and long-term goals.