Was your New Year resolution to be mindful of your expenses? A lot of people often take this opportunity as a fresh start to start managing their finances better and save more money for the future. One of the first things people do to achieve this is create a budget; but does it really help?
Turns out, it does. Those who create a budget and stick to it sincerely do end up managing their earnings better. However, in the long run, you will need to do more than just that to successfully improve your financial situation and avoid debts.
Here are some of the easiest ways to manage your finances better:
1. Verify your income & expenses:
To get started, it is crucial to first understand where you stand. While you may know how much money you make every month, you may not have a solid answer to where it disappears by the end of the month.
Good financial management entails understanding your income and having a reality check of your expenses in your present scenario. You can use this information to verify if there are any expenses that are unnecessary and can be avoided.
2. Set realistic goals:
Once you have a good understanding of where your money gets spent, it’s time to lay out goals as per your priorities. It is crucial to set short-term as well as long-term goals that are realistic and attainable.
Defining where your money needs to go can help you curb any habits that are not in alignment with your financial goals. Make sure you don’t go too harsh on yourself while planning the budget and setting goals as you may not be able to keep up with it for long.
3. Look for saving options on every purchase:
Start being mindful of where you are investing your money and look for saving options. If possible look for cheaper alternatives of products that do not compromise on quality. For getting discounts on services, make sure you fulfill all the eligibility criteria.
For instance, if you are over 65 years of age but your income exceeds the limit to qualify for Medicaid, you can spend your excess income on medical bills which will help you become eligible for it. Such Medicaid spend down ideas prove beneficial for senior citizens who need to constantly pay high medical bills.
4. Stop impulse shopping:
We often seek instant gratification that makes us pick up things on a whim and regret later. To avoid this regret, you need to curb impulse buying and think hard before putting your money into anything.
If you really like something online or at the store, do not pick it up immediately. Even if it’s not a very expensive thing, a lot of such small things bought impulsively can burn a huge hole in your pocket. Give yourself some time and ask yourself if you can go on without it. Chances are, the answer will be a yes.
5. Build an emergency fund:
Life is unexpected and nothing can keep you mentally prepared for unfavorable situations. But you can ensure you have enough savings for such a time by keeping aside a portion of your earnings every month.
For starters, put at least 10% of your income in an emergency fund every month and keep increasing the percentage over time. If there are no such events that will require you to tap into the emergency fund, it will help you earn a good interest on the overall amount.
To keep a track of how you are managing your income, use an expense tracker app to enter all your financial transactions and see where your money is getting spent. This information will help you be mindful of your spending and make smarter decisions.