7 Ways To Get Better With Money
Some people are intimidated by financial management, but it’s really a life skill, like anything else, that we learn. Sometimes it helps to break it up into a couple of bite-sized pieces. Below are 7 practical tips to help you get on your way to great financial health:
1. Set a budget.
Knowing how much money is coming in and how much money is going out is critical to your overall financial health. If you don't know your cash-flow, you don't really know how much is left over for fun, for savings, and for that brand new beach cruiser deluxe you’ve always wanted …
2. Stick to the budget. (Boring, I know. But so helpful!)
Many people have set a budget for themselves at some point in life. It's important to then stick to this budget and live within your means OR (even better, if possible) below your means. Check-in weekly to make sure you’re on track. If you have to exceed one of the necessary categories in your budget (food, for instance), look at other areas you can decrease to stay within your monthly allotment. Remember: it’s always easiest to stay within your budget by weighing “wants versus needs.” We all want a Venti Mocha Frappuccino everyday at 3pm, but do we need it? Having one a day adds up to that Saturday lunch with pals!
3. Treat yourself.
As you’ve heard before, "Don’t get so busy making a living that you forget to make a life." Trips, vacations, and other big items can enhance our lives and bring us happy memories. It’s not the goal to deny ourselves everything we want, just to keep it in check while budgeting for what we need. Build your big wish-list items into your budget. If you’re a teenager, it could be this summer’s surfboard. If you're in your 20s or 30s, it could be that trip to Paris. For the family, don’t forget: taking the kids to Disneyland is allowed! And hopefully there can be room in the budget for it all when you build it in.
4. Set savings goals.
Want to buy a bike? A car? A house? There are always monetary goals that take some time to reach. These should also be built into your budget alongside your monthly spending. Finding an extra $20 in your budget every paycheck or every month can go a long way toward getting you what you want in a way that's financially savvy.
5. Have an emergency fund.
One of the most important savings goals is to have an emergency fund. Financial experts recommend that you have enough money to get by in case you lose your job or have a sudden financial emergency (like you need new brakes on your car). Aim to stash away enough money to cover your expenses for three months to a year, depending on your life stage. If you're caring for young children, for example, it's probably better to build a bigger emergency fund. If you're young and could crash on friends' or family's couches during tough times, realistically, you probably don't need as much. I know this is a lot of money to set aside; it can take years to have an emergency fund, so be sure to build that into your budget, too.
6. Pay off your credit cards.
Debt from credit cards can ruin your credit score and cost you big money in the long run. If you want to get a sense of just how costly debt can be, check out the Federal Reserve’s online repayment calculator. It will tell you how much interest you’ll accrue over the next few years on your card's current balance, to how many years it will take you to pay that balance off with no further charges. Another reason to pay off your credit cards: it helps your credit score, which can help you save big on loans for major purchases, like a new car or a new home.
7. Improve your credit score.
By obtaining a great credit score (ideally 750 or higher), you'll get the best deals on loans. A credit score could mean the difference between landing a higher or lower interest rate on an auto or home loan. That might not sound like a lot, but even a tiny percentage of a difference on an interest rate can save you tens of thousands of dollars over the life of the loan. The first step to improving your credit score is knowing your credit score! You can see your credit reports from each of the three big credit bureaus for free at annualcreditreport.com.
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