For many, debt has become a standard aspect of life as we strive to keep up with the modern era. Whether it’s from borrowing money to access further education or taking out a mortgage for a new home, most of us have some debt.
The average American has $90,460 in personal debts, including consumer debts and various types of loans — think mortgages, personal and student loans. While it is normal to have debt, budgeting and getting to grips with your finances is more important than ever as we try to manage our money better and not let our finances get away with us.
The average adult in the US spends $1,497 on non-essentials per month, while their savings are often not a priority. Having minimal to no savings may not seem like an issue now, but later down the line, you could use this money for things like retirement or any unexpected expenses you may face.
In this article, we will cover our top five money management tips that will help you get better at controlling your outgoings, as well as putting money aside to prepare for the future.
How can I manage my spending better?
You don’t have to rely on a personal finance expert to manage your money wisely. You can do several things yourself to get your spending under control, from small daily changes to more carefully planned methods that will help you manage your money for the long run.
1. Organize your finances and make a budget
Our first money management tip is to get your personal finances in order and assess your current situation before you start trying to make changes or set financial goals. This will mean you have a clear idea of how much money you have coming in each month and your outgoings. Here, you will be able to identify how much money you have left from your paycheck once all your essentials, such as food and bills, have been covered.
With these aspects in mind, you can start working on creating a budget for yourself to allocate a specific amount of money to each of your outgoings. Once you have this in place, regularly check and update it throughout the month to keep an eye on your spending and ensure you are not going over your set budget.
If you find it hard to stick to a budget due to the temptation of dipping into your funds, consider a different payment method such as a prepaid card that can help you control your spending. You can pay for goods and services as usual, but rather than the card being connected to a current account, a set amount of money is loaded onto it, so you can only spend what is on the card.
2. Create an emergency savings fund
Despite experts suggesting that having an emergency fund of at least three to six months of living expenses is crucial, recent data has revealed that nearly 1 in 5 Americans didn’t save any money in 2021.
Having savings relieves some financial stress, particularly when it comes to unexpected expenses such as vehicle maintenance or an unplanned trip to see family for an emergency. Making regular deposits into a savings account will help ensure you have enough money to cover these events. Furthermore, you will be less likely to end up in debt by taking out loans to make large payments for things you have not considered.
Once you have an emergency fund in place, you can start putting money towards other savings goals that will also benefit you in life. One of the most important things to plan for is retirement, and the earlier you start saving, the better.
3. Create a plan to pay off your debts
Dealing with debt can feel daunting and impossible, but you can significantly improve your financial standing with careful planning and determination. Overcoming your debt and achieving financial freedom doesn’t have to be a challenge, as numerous debt relief companies, such as TurboDebt, are ready to offer expert guidance. By becoming debt-free, you open yourself up to better loan, credit card, and mortgage rates, leading to long-term benefits for your financial well-being.
At a minimum, you must cover the minimum payments on any loans you got from cash advance apps or credit cards you have in order to avoid breaking the terms of your agreements. However, when it comes to paying off additional debts, weigh up the types of debt you have and how much each one is costing you. It is recommended that you pay off the debts with the highest interest rates first — these usually include credit cards, store cards, and bank loans.
4. Track your spending
Managing your money is an ongoing process and learning how to be better with money, particularly if you are not usually someone who budgets or saves, is something that will take some time to achieve.
To stay on top of your financial situation, keep checking in on your bank account and update your budget with your current spending habits. This way you can track where you can make adjustments and manage money more effectively. Additionally, your savings goals may change throughout the year so you can make provisions for this too when you update your spending plan.
It is also worth checking your credit report and score at least once a year. Doing so will mean that you not only know where you stand in terms of financial progress, but you can also identify any errors or issues on your credit report that could hinder your eligibility for services such as loans or mortgages.
5. Cut back on expenses
Once you have learned where your money goes, you can identify where you can cut back on unnecessary purchases hindering your savings goals.
If you often spend more than you make each month, work out what you can spend less on, such as leisure and entertainment. Smaller purchases like your morning coffee can quickly add up and often cost you more than you realize overall. Similarly, dining out regularly is nice, but forgoing the occasional restaurant meal could mean you can save up for a more critical purchase — you can decide what this is yourself based on your life goals.
