Don’t see your savings getting any higher compared to last month?
It’s easy to get stuck in a cycle of debt when you don’t know how to improve your personal finances. This might be due to your low income, unnecessary shopping, unclear financial goals, and unpaid debts. When managing your money, you need to know where it will go and how you’ll boost your earnings.
In this guide, we’ll tell you how to get your personal finance out of the financial pickle. Read on to learn 15 ways to save your personal finances from drowning in debt.
1. Create a Budget
When diving into saving, it’s always good to have a budget. Money comes in, but it may only take a few days before you spend every single penny.
A budget is the best tool to ensure you don’t spend above your financial limits. This ensures that you have savings for next month and extra cash for emergency expenses. Budgeting will also help you evaluate your financial health so you can make any necessary changes.
Start by writing down all your expenses and your income. When writing down your income, you can include:
- Child support
- Royalties and rent
- Dividends and interest
- Social security
For general expenses, you can include categories like:
- Health care
Once you list them all down, subtract your income and expenses to find your discretionary spending. This is the leftover cash from your income for extra expenses.
It’s best you set up a budget at the start of every month to see where your discretionary spending can go. Then, take a look at your spending over the month and check if you’ve stuck to the budget.
If you’ve spent more than your budget, you have to fix your budget by removing unnecessary expenses or earning more. In addition, you have to ensure that your budget every month matches your lifestyle and improves your financial issues. You can use the best personal finance app to help you, such as Excel or apps like Mint.com.
2. Plan Your Financial Goals
With saving, you have to have a realistic goal to strive towards, such as buying a house or saving for retirement. If you don’t have a goal, you may lose the motivation to keep investing and saving every month.
So, you have to create plans that are SMART (Specific, Measurable, Attainable, Realistic, and Time-based). For instance, don’t set a goal to pay a $50,000 debt when you only have a $30,000 salary. With this, you may get discouraged to save or make the best financial plans in the future.
Ensure that you are clear and precise on what you need and want to achieve in a year. Then, sort them into your short-term and long-term financial goals so you can manage them accordingly.
3. Know Your Wants and Needs
Unless you have unlimited cash, it’s best to be more mindful of your wants and needs to make the best spending choices. Start by separating your extravagant and unnecessary purchases from your needs. For example, buying a car is a need for easier travel, but getting the fanciest and most expensive car is unnecessary.
All your needs have to be your top priority in your personal budget. This includes your bills, groceries, and rent. If you want to save quickly, avoid impulse buying and only buy things you need to survive.
4. Save as Early as Possible
It’s never too late to start saving for future funds and even retirement. If you start saving now, you can take advantage of compound savings. This is where your income from investments can get reinvested for the chance to earn more.
Your retirement plan will have the chance to grow faster, making it easier for you to achieve your long-term goals. This is also a good emergency fund in case you have any financial emergencies.
5. Build an Emergency Fund
Emergency funds are what you set aside for emergency needs. It will help you pay for the things that aren’t normally in your budget, such as unexpected bills like car repairs. Emergency funds are great for those who get interrupted or irregular income.
Aim to save for at least six months worth of your average living expenses. Putting an emergency fund aside will help maintain your budget and avoid financial issues in the future.
6. Lessen Your Monthly Bills
If you know you’ve got unnecessary monthly expenses, it’s best to cut them off. While there are some fixed expenses like rent and energy bills, you can reduce your variable expenses. This includes clothing or entertainment like Spotify and Cable.
Another way to reduce your bills is by reducing your use of certain utilities. For example, change your lights with energy-efficient lightbulbs or reduce your water use when taking a bath.
7. Avoid Eating Out
Eating outside is one of the most common reasons why you lose money every week. It’s time to change your habit of eating out and get used to cooking at home.
Start small by buying groceries and cooking at least once every week. Then, you can bring your lunch to work next week. Rather than eating out for a $13 meal, you can instead buy $4 groceries with $9 savings for each person in your home.
8. Pay Off Your Debts ASAP
One of the most expensive mistakes you can make is leaving your debt to accumulate and carrying plenty of debt. It’s best to pay off your debts immediately if you want to improve your financial picture plus financial opportunities.
Start by writing down all of your present debts, including your credit card loan, personal loan, or student loan. Place the more expensive ones at the top to prioritize paying them off first. Now take a look at your budget and determine how much of the discretionary budget you can use to pay your debts.
9. Don’t Use Your Credit Cards
If you’re struggling too much on making ends meet every month, then you might be relying a lot on your credit cards. Using your credit cards as your stop-gap measure to help ends meet is a big rabbit hole into more debt. With more debts to pay, you’ll have to save less, pay more, and work toward other financial goals.
Stop using your credit cards if you want to take charge of your finances. You should switch to debit cards to avoid getting more debt and open up a short-term savings account.
10. Search for Extra Sources of Income
Some financial issues may stem from the lack of income compared to your spending issues. If you’re sticking to a budget and still struggle with paying your needs, it may be time to find a higher-paying job or get another one.
More income means more financial stability, especially when living in a single-income household. If you can’t change your job, you can always look for a freelance job or getting into odd jobs.
11. Be More Money Motivated
You need a lot of motivation to start applying better spending habits to stay on track with your financial goals. To be more money motivated, consider setting specific financial goals with numbers and dates rather than words. For example, how much do you want to save by the end of the week or month?
You should also savor what you have instead of trying to be happier by acquiring more things. If you can’t feel motivated, why not do it with a friend. You can pick up the good spending habits of your friends while motivating each other to save more.
12. Shop Smart
Shopping is a fun way to spend what you’ve worked hard for, but it can also drain your income fast. Impulse buying is the most common reason why many empty their wallets. To avoid this, you should make a shopping list and stick to it.
Always think twice before buying an object. Do you need it, and how often will you use it? You should indulge in your needs rather than getting items you might only use once.
13. Get Properly Insured
With the right amount of insurance, you can guard your savings. This includes life insurance, car insurance, health insurance, and homeowner’s insurance. While it’s tempting to skip, you have to remember that it protects you from spending your finances when you’re involved in accidents and catastrophes.
14. Consider Investing
You can gain a lot of cash if you invest in real estate, bonds, stocks, mutual funds, and other financial instruments. Although it’s a long-term process, you can gain up to 10% annual return from the stock market. You can build your wealth by knowing the trends and letting your stocks sit overtime for a higher cost.
If investing intimidates you, consider meeting with a financial advisor, enrolling in a class, or talk with a friend who has investing experience. While it may come with risks, investing in diverse asset classes, like bonds and stocks can help maximize your gains and reduces your losses.
15. Protect Your Savings
If you put great effort into saving every month but tend to spend it on impulses, you should take extra steps to protect your finances from yourself. You can move your savings to a CD or certificate of deposit or an online bank, so your funds are less liquid. You can also start an emergency fund at a different bank, away from the one you frequent.
Protect Your Personal Finances With These Tips
With the use of these tips, you can better manage your income and expenses from unnecessary spending. Take the time to budget your expenses and income, so you can spend all you want within your means. It’s time to start putting away some cash for your future, leisure, retirement, and emergency purposes.
Want more tips to help with your personal finances? Check out the rest of our guides for more helpful saving tips!