The economic challenges of the past year have resulted in business closures and job losses worldwide. If you experienced personal income challenges, your financial health likely took a hit. Fortunately, there are steps you can take to face your money woes head on.
Boosting your personal finances is no easy feat. But by getting real about your money and setting actionable goals, you can get out of this rut. These tips will help you not only boost your finances but do it well.
Your credit score is central to your financial wellness. If you’re not confident about your finances, you might avoid looking at this number altogether. However, the truth is that you can’t start improving your finances until you know where you stand. Check your credit score, tally up your debt, and sift through your credit card statements.
If your credit score has taken a dip, it’s a smart idea to hide your credit cards away for a while. Make purchases with debit cards and cash as much as possible to avoid spending money you don’t have.
Speaking of spending money you don’t have, do you know where your money is really going? Consider taking a week or month to track every penny you spend. Apps like Mint and You Need a Budget are great resources for money tracking, but you can also go old school with a spreadsheet.
Chances are, you’ll be surprised at how much of your income ends up in spending categories like coffee, clothes, and takeout. Tracking your spending can be eye-opening, but try not to beat yourself up too much over past missteps. You’re taking the time to improve your finances to increase your overall well-being, not descend into a shame spiral.
Financial pros agree that saving for retirement and starting early will prevent financial stress later in life. So now is the time to take retirement saving seriously (if you haven’t already, that is).
This is another finances-boosting step you can take right away. And retirement plans aren’t just for the big companies, as even smaller companies tend to offer options. Ask your employer about any small business 401(k) plan they may have or sign up for an individual retirement account (IRA). You can research many types of retirement accounts, but these are two of the most popular.
Remember, you don’t have to throw your entire paycheck into this account. Even just $50 per month can get you started. Once you get familiar with retirement accounts and pay off more debt, you can start allocating more money to your retirement savings.
A clear and realistic budget is another key component of personal finance. Setting aside an hour to craft a budget can do wonders for your financial health and spending habits. There are a few steps you should take when making your budget.
First, write out a list of all your fixed monthly expenses. These expenses don’t change much, such as your rent or mortgage, insurance, utility bills, and car payment. Next are your variable expenses. These items vary month to month, including groceries, gas, clothing, eating out, and childcare. (Your spending tracker can help you spot these.) You’ll want to consider savings and retirement contributions as well.
Add up your expenses and compare them to your income. Note how much you have left. You can then adjust your variable categories to maximize your savings.
You’ll want to be honest about your debt when looking to improve your finances. And while you certainly don’t need to pay off your debt all at once, you do need to have a plan. Include all your debt sources, such as student loans and credit card debt. Use an online debt repayment calculator to determine a debt pay-off timeline and adjust potential monthly payments accordingly.
Take note of how much you’ll need to set aside per month to pay off your debt by your target date. This will likely entail paying much more than the minimum payment. If you’re struggling to find the cash to reach this goal, revisit your budget categories and cut back.
When your finances slip, your savings might be the first thing to go. No surprise there — financial rainy days are one of the main reasons to save, after all. So if your emergency fund has been depleted, restoring it will be essential for both your peace of mind and financial health.
Don’t already have a savings account? If you have a habit of dipping into your savings to make discretionary purchases, it’s time to make a change. Ask your employer to direct a portion of your paycheck to your savings account. Then open one — bonus point if it’s a high-yield account. With this mechanism in place, money will automatically enter this account every few weeks, and you’ll be less likely to spend it.
Ultimately, there are two main ways to boost your finances: save more and earn more. You’re already focusing on your savings, so consider increasing your income as well. If you have the time, a side hustle is a great way to do this.
Consider what skills you have to offer and how you can turn your talents into profit. Driving for a food delivery service, selling art online, and tutoring local students are just a few ideas to get you started. Even a few hundred dollars more per month can do wonders for your savings and debt repayment.
Boosting your finances is an ongoing journey. There will always be space to make improvements and learn more.
Books, podcasts, blogs, and social media are excellent tools for improving your financial literacy — and you can use these resources for life. After starting with basics like budgeting and saving, you can move on to more advanced practices and learn to build real wealth.
While improving your financial life can be intimidating, you can tackle your finances a bit at a time through small, actionable steps. Get real about your spending, develop a budget, pay off debt, and take steps to boost your savings. The effort will pay off in future financial freedom.