7 Ways to Manage Your Money Better
If you’ve committed to getting out of debt in 2016, you may already be feeling overwhelmed. Fortunately, making the decision to be better with money matters is the first step on the road to financial freedom. Learning how to manage your finances is a very rewarding and valuable experience, but at first, the jargon and the diverse strategies, each more daunting than the last, might leave you feeling more intimidated than relieved.
- Take control of your debts. If you already feel burdened by debt, checking your credit report may cause you anxiety. You’re not alone. Ignoring or denying the reality of your debt is a common story.Unfortunately, the longer you put it off, the more stressed out you will become. Like traffic citations and dirty dishes, ignoring the problem won’t make it go away. Ignoring the problem will only make it more difficult to address when you inevitably must face it. The most important thing for you to do right now is take a look at any bills currently lying unopened. Although debt can be a frightening problem to face, it’s better to have a clear picture what you’re dealing with. Review your credit score to see where you stand. Once the worst is over, you’ll be glad you did it.
- Set a long-term goal. It’s difficult to plan, prepare, and stick to a budget if you don’t know what you’re saving for. Beyond getting out of debt, your ultimate goal should be to ensure that you don’t fall back into old financial bad habits in the future.Maybe you’d like to get your credit score above 800. Perhaps your dream is to save enough money to take your family on a tropical vacation. Maybe you want to set aside a trust fund for your children or grandchildren. What does your ideal future look like? Picture it, set a goal, and work toward it.
- Prepare a realistic budget. One of the most common reasons why people fall short of their budgeting goals is that they didn’t set reasonable goals for themselves. Contrary to popular belief, you don’t need to feel guilty if you choose to prioritize some expenses over others.Try to think of budgeting as a small (but crucial!) step along the road to financial freedom, and not as the one-size-fits-all solution that many people mistakenly believe it is. The goal of a budget is to motivate you to spend less than you earn, and to help you pinpoint problem areas when it comes to overspending.
- Seek support. Don’t be afraid to ask for help if you feel like you’re in too deep. Having an accountability partner to rely on when things get tough can be immensely beneficial, for both your finances and your peace of mind. This is especially true if you struggle with overspending or you have difficulty understanding your finances.It is always important to remember that you are not alone, and your debt problems can be overcome. Chances are, someone has been in the exact same situation as you at some point, and if you ask, they might be happy to offer you some guidance.
- Track your spending. Whenever you make a purchase, track how much you spent and what you spent it on. Even small purchases like your morning coffee can add up significantly, and when you look back on your spending habits, you’ll be able to see where your weaknesses are.This strategy requires a certain level of dedication—after all, you have to remember to input the information after every single purchase, no matter how large or small—but the results can be eye-opening. If you have a smartphone, you can use an app like Concur or Expensify to do this more easily.
- Pay cash. If you have a history of overspending and you’re now burdened with credit card debt, you understand the temptations that plastic can bring. Studies indicate that when people pay cash, they feel a stronger emotional connection to the money and are thus less likely to overspend.If you are often tempted to make impulses buys, take cash out your debit card with you when you go shopping, and leave the credit cards at home. Some savvy budgeters like to operate almost exclusively in cash. These spenders withdraw a set amount of cash each time they get a paycheck, and that becomes their spending money until the next pay day rolls around. If you can avoid the draw of online shopping, this is an easy way to adhere to a strict budget.
- Reward yourself. It’s easy to feel worn down when you’re facing financial difficulties. Many people struggle to stick to their budgets because they deprive themselves of everything. The good news is, you don’t have to go cold turkey. You can still enjoy small luxuries in moderation.At the beginning of every month, make a list of small purchases you’d like to treat yourself with. If you stick to your budget and make your payments to your creditors, take yourself out for lunch or buy yourself a new piece of clothing as a small pat on the back for a job well done.