Do you feel like you’re bad at handling your money? Do you check your banking account and ask yourself “Where did all my money go?”
If you’re someone who struggles with money management, you’re not alone. In fact, the average American household carries $16,061 in credit card debt.
On top of this, only one-third of Americans keep a household budget. And, only 30 percent of Americans have long-term financial plans that include savings goals and investment goals.
Luckily, there are plenty of things you can do to change the outlook of your financial future. And no, you don’t need to win the lottery or take on another full-time job. All you need to do is learn how to be good with money.
Check out this guide to learn the top money tips that will help get your finances in order.
Set a Budget
As we mentioned earlier, only 30 percent of Americans have a budget.
Many people don’t bother to make a budget because they don’t want to go through the boring task of listing out all of their expenses, adding up all the numbers, and ensuring that everything lines up.
But, if you have poor money management skills, then a budget is an absolute necessity.
All it really takes is a few hours of sitting down to get your money on track.
Now, the type of budget you create will depend on your financial goals, your lifestyle, and how much debt you’re carrying. If you’re not sure where to start with your budget planning, it can help to follow the 50/30/20 rule.
With this rule, 50 percent of your finances will go towards necessities (think rent, utilities, groceries, etc), 30 percent will go towards luxuries (think vacations, nights on the town, gifts), and the remaining 20 percent will go into your savings account.
However, depending on your lifestyle, you may need to tweak this rule. For example, you may find that you need to take 10 percent out of your luxuries and 5 percent out of your savings and put that money towards paying down your debt.
Track Your Spending
Of course, there’s not really any point in creating a budget unless you’re going to track your spending and make sure you’re staying on track.
Small purchases can add up rather quickly, and before you know it, you’ll be over your budget in one area before the month is even halfway over.
So, keep a spending journal and keep track of every purchase you make, no matter how small.
At the end of each month, reflect on your spendings and look for areas where you can make improvements.
For example, you may find that the $7 lattes you’re purchasing 3 times per week really aren’t necessary and that you should instead be making your coffee at home.
Save Up for Big Purchases
When many of us have a big purchase we want to make, we put it on our credit card bill and worry about paying it off later.
However, this type of behavior can quickly lead to a cycle of endless debt.
We all love instant gratification. However, by putting off a large purchase, you give yourself more time to evaluate whether or not the purchase is really necessary. Plus, waiting to buy it also gives you time to shop around and find a better price.
And, by saving up for your purchase rather than putting it on your credit card, you avoid having to pay interest on the purchase.
So, whether it’s a new TV, a new bed frame, or a new video game console, saving up for your big purchase will make it all that more rewarding when you buy it with your actual money.
Start an Emergency Fund
All it takes is one big emergency to turn your finances into a huge mess.
To prevent your finances from derailing due to an emergency, we highly suggest setting up an emergency fund.
You don’t need to be putting thousands and thousands of dollars into this fund. Even just $50 each month can really make a difference.
As much security as you think you might have, you never really know when you’re going to get in a car accident, lose your job, or injure yourself. To make sure you’re covered during these times and don’t need to dip into your checking account or savings account, an emergency fund is absolutely necessary.
Take Advantage of Your Employer’s Retirement Match
To put it bluntly, if you’re not taking advantage of your employer’s retirement match, you’re throwing money down the drain.
An employer match on your retirement contribution is free money. And while free money sounds like music to the ears, so many of us are missing out on this opportunity.
In fact, a recent study found that American workers are missing out on over $24 billion on employer retirement matches.
And, the good news is that most companies provide a match that is extremely affordable — around 2.7 percent.
For sake of argument, let’s say your employer matches 100 percent of your contributions up to 3 percent of your salary.
So, if you make $60,000, this means you can put as much as $1,800 in a year and your employer would match that with $1,800. Of course, you can always contribute more to your (401)k, but your employer’s match would stay at $1,800 unless your salary or benefits were negotiated.
Invest in Things You Truly Appreciate
With the growing popularity of minimalism and Marie Kondo’s philosophy of tidying up and only keeping things in our lives that spark joy, more and more people are taking stock of all the clutter in their homes.
If you’re constantly spending money on clothes, cars, and other tangible items that don’t appreciate in value over time, then you’re on the path to poor cash managing.
While it may sound cheesy, there’s something to be said about only buying things that we truly appreciate (save for the necessities).
Not only will treating yourself sparingly allow you to better appreciate the items you buy, but it will also mean you’ll have more money in your pocket to buy quality items that stand the test of time.
While it may seem ridiculous to spend $75 on a pair of jeans when you could be spending $15, that $75 pair is probably going to last you a lot longer.
So, before you make a purchase, ask yourself:
Is this something I really need?
Do I see myself making use out of this item for years to come?
Is this a quality item that will last me a long time?
By asking yourself these questions with each purchase you make, you’ll be better able to assess what’s necessary and what isn’t.
Set Up Automatic Deposits
For those who struggle with money managing, automatic deposits are a thing of beauty.
We suggest setting up two kinds of automatic deposits: one that goes into your checking, and another one that goes toward your credit card bill.
Depending on your budget and financial goals, you can then decide how much money you want to stash away and how frequently you want to do it.
If you feel overwhelmed by starting a savings account, then focus on starting small.
Even if you just contribute $50 per week, by the end of the year, that $50 will be $2,600! Keep doing this year after year and add in compound interest, and you can see how these small contributions can really add up.
Think Twice About Your Credit Card
For some people, credit cards can be a great way to build credit, prove financial responsibility, and earn cash back and other rewards.
However, for other people, credit cards are a complete nightmare that leads one into a life of debt and financial ruin.
Before you apply for a credit card, it’s important to know which type of person you are. If you know you’re the type of person who can manage a credit card responsibly, then by all means, use one.
Credit cards come with tons of perks, and if you’re smart with the way you use your card, it can actually end up saving you tons of money.
However, if you have no self-control when it comes to credit card spending, then it may be time to take a pair of scissors to your card and stick to cash and debit until you get your finances in order.