5 Ways to Manage Your Finances

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Every month you find yourself cringing when you open your mailbox. You look at your bills and sigh, wondering what you will have to give up this week to make the ends meet. So far you’ve managed to keep your head above water, but only just.

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Source: pixabay.com

If this sounds like you, then its time for you to regain control of your financial future, and you can with just five simple tips.

Budgeting
Most people know that they should have a budget, but few actually take the time to create one that they can live with. And that is the problem. With U.S. household debt on the rise, it’s important for consumers to develop the skills to avoid financial pitfalls. The first of these skills is budgeting. You don’t need to be a math whiz or buy any expensive tools. A simple pencil and paper will do just fine. When creating your budget, don’t forget to include a line for entertainment, gifts, and savings. Too many budgets are quickly abandoned because the purse strings are pulled so tight that there is no room for fun. If there is anything leftover at the end of the month you can either save it, use it to help pay off debts, or add it to a household “slush fund”. This fund is for unbudgeted spending and is best limited to cash payments. Many people keep a jar or piggy bank for this purpose. Once the kitty is empty, then the party is over.

Get rid of debts
You probably won’t pay off your mortgage this year, but you can probably eliminate that car loan that’s been hanging over your head. You can knock down the credit card debts in a year. Library fines, store credit purchases, and many kinds of lingering medical debt can all be eliminated over the next twelve months if you create a debt elimination plan and stick to it. Understanding all of the fine print may be a little confusing at first, but there is help available. Don’t be ashamed to get help with managing your debt. It may be advantageous for some people to consolidate debts and get a debt consolidation loan. This may save you money in the long run. If you aren’t sure whether or not this is right for you, sit down with a professional who can help you figure it out and tell you exactly how much you are paying in interest on your individual debts and compare it to what you might pay with a debt consolidation loan. Whether this is right for you or not, as you begin to eliminate debts, it’s important that you don’t fall into the same trap again. Get rid of temptations by closing unnecessary credit cards and eliminating bloat from your budget.

Downsizing
Chances are your lifestyle could cost you less than what you are paying right now. Taking the time to shop around and get the best price on things like dry-cleaning, cable, internet, phone bills, insurance, and gym memberships may save you hundreds of dollars every month. Using coupons, and avoiding impulse purchases at the grocery store is not only healthy for your waistline, but your bottom line will start to look better as well. Consider how many times you eat out, or buy coffee every week and how much those purchases cost. You could much of that by preparing meals at home and taking them with you. When it comes to gadgets and clothes ask yourself if you really need them or if they are just shiny objects. A good rule of thumb is to wait a few days before buying. If, after a few days of deliberation, you still can’t live without the new shoes or gadget, then buy it.

Save for the things you want
This tip sounds straightforward enough, but many people struggle with it. They see something in the store that they may legitimately need, but it’s just not in the budget right now. In a month’s time, they may be able to afford it, but they’ve run out of cash and want to make a purchase. So, they reach for the credit card. Instead of charging your new sofa or microwave onto the credit card and running up new debt, it would be better to simply save up for the purchase. This will require you to exercise some willpower and make a few sacrifices, but by saving for larger purchases you will avoid falling back into debt after you’ve worked so hard to clear them up.

Start saving today
Ideally, you need two types of savings accounts. One is what I call short term savings. This is the money you will draw on in an emergency or when you haven’t been able to stick to your budget. The second is a long term savings account, like a retirement account. This is money that should ideally disappear from your budget and be forgotten. The earlier you start building the habit of saving money, the better you will be later in life. Not only will your nest egg be larger, but the habit of “paying yourself first” will be firmly in place.

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Too many people are trapped in the habit of living paycheck to paycheck. Too many people think that the only way to escape their financial woes is to make more money, but find themselves in the same situation after a short while. That’s because managing your money well has less to do with the size of your paycheck and more to do with your money mindset. In many cases, with some smart financial decisions, they can begin to regain financial security. Changing your spending habits, eliminating debt and adjusting your lifestyle to fit your budget will help you live better.

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Summary
Title
5 Ways to Manage Your Finances
Description
Every month you find yourself cringing when you open your mailbox. You look at your bills and sigh, wondering what you will have to give up this week to make the ends meet.

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