According to the Financial Health Network, 70% of individuals struggle to achieve financial stability due to the challenges associated with paying bills on time, paying down their debt, and saving money. Managing money takes time and effort, but the financial peace of mind it brings is rewarding.
If learning how to manage your money sounds intimidating or stressful, take it one step at a time. Here are 5 tips to help you gain control and, more importantly, peace of mind:
Make a plan for your money.
Without a plan, finding yourself short on money is effortless because it can make it easier to overspend. After all, the treat yourself logic is tempting to embrace. If you say yes to too many unnecessary expenses, you might be disappointed with your savings. To combat this, take the time to make a budget.
Plan out when and how you want to use your money. In addition to your everyday expenses, think about your savings goals for the future. Find a budgeting method that works for you because it will help you manage your money better.
Check in with your finances every day
You can't make progress without knowing where you stand because you won't know where to start. Take five minutes every day to check in with your budget. Are you overspending? Are you right on track? It's important to know because then you can make adjustments where necessary.
It might sound tedious to check into your financial situation every day. However, it doesn't need to take a long time. Use an app or spreadsheet to quickly determine how you are financially and make changes as needed.
Build an emergency fund
Planning for unexpected expenses is a great way to manage your money! An emergency fund can be critical because life throws significant expenses your way when you least expect it.
Typically these emergency expenses are accompanied by unpleasant events such as a hospital visit or job loss. You never know when an emergency will appear in your life, but you can prepare for it. Make it a priority to put money into your emergency fund every paycheck.
Many experts recommend saving three to six months of expenses in your emergency fund. However, this will depend on your risk tolerance. If you feel better with more saved, you can add more to your emergency fund.
Plan for large expenses
While some expenses are unpredictable, you can plan for other expenses months in advance. For example, you may need to pay for insurance at one time which may cost thousands of dollars. Instead of scrambling to come up with the funds for that bill, create a sinking fund.
You can save a portion of each paycheck for these hefty bills to make sure you have enough to cover them. This is where budgeting comes in handy. You'll be able to add this sinking fund to your budget and never have to worry about significant upcoming expenses again.
Learning to manage your money is excellent, but making it work for you is even better. Investing is a crucial piece of investing if you plan to build long-term wealth. Investing over a long time can lead to excellent returns. You'll be able to grow your money slowly as you invest more every year.