Successful money management has nothing to do with luck. There are proven principles and tactics that anyone can follow to improve their financial well-being. If you feel that you never have enough money or are always worried about your finances, there are simple steps you can take to get on top of your finances.
Below is a look at several practical steps you can take to get on top of your finances.
Create a Household Budget
There is no way you can take control of your finances without first creating a household budget. A budget will highlight financial misuse and provide clarity on how you spend your money. Knowing where you spend your money and how much you need each month to cover costs will help you make better purchasing and financial decisions. Budgets create discipline and can quickly help you become responsible and accountable with your finances – Learn how to create a practical yet effective budget.
Start a Savings Plan
When setting up your budget, make sure you create a budget category for savings. It is typically recommended that you try to put at least 10% aside each paycheck in your savings account. This nest egg can help you in two ways; it can be a portion of your investment strategy and/or can be used for unexpected circumstances such as, job loss, health issues, or other situations which require a large amount of money.
Set Up an Emergency Fund
It is also important that you set up an emergency savings fund. This fund should be separate from your regular savings account and is to cover you for general expenses, such as car repair, household appliances repair/replacement and other smaller expenses. Most experts agree that you should have at least three months of income set aside in this emergency fund but the more the better. Having an emergency fund can keep you out of debt and provide some financial confidence knowing that you have reserves available for most unexpected expenses.
Work Towards Eliminating Debt
Once you have a budget in place and have started to put some money back for savings, it is time to start working towards eliminating your personal debt. Paying debt off as quickly as possible will help you save on interest payments. Try to put as much money as possible towards paying down your debt. Once your debt is paid off, you will be in a position to really start growing your financial wealth. See how to quickly eliminate debt.
Start Investing Your Money
Another important part of taking control of your money is to start making decisions about how to invest your money. Take into consideration all your short, medium and long-term goals; selecting investments that will help you achieve them. Advice from a qualified financial counselor may be able to help you determine the right investment options for you. Most financial experts suggest that you should plan to put about 15% of your household income towards investments.
Get Rid of Your Home Mortgage
Once you have paid off all your debts and have more money available, it is a great idea to use some of that extra money towards paying your home mortgage down faster. Even small, extra payments on your mortgage can save you a lot of money in interest over the life of your mortgage. Once your mortgage is completely paid off, just imagine how much extra you will have each month to put towards other things you want and larger investments for your future.