Personal Finances – 4 Tips for Better Control
4 Tips to Get Better Control Over Your Personal Finances
If you already know terms such as account balances, budget, credit score, debt retirement and retirement savings, then you’re on the right track to getting control over your personal finances.
Should these terms cause you angst, you’ll be glad to know that millions of people feel the same exact way as you. The National Endowment for Financial Education found 75 percent of millennials feel anxiety about their personal finances. The NEFE was set up in 1972 as a non-profit to educate Americans to help them make better financial choices and improve themselves.
A good number of millennials hesitate to get control over their finances. To them, personal financing is done at a full-out run. It doesn’t have to be that way. Minute changes in how you approach your finances can have a significant impact on your current and future financial health.
If you’re tired of robbing Peter to pay Paul, it’s crucial to learn money habits that will carry you from one day to the next. The four tips below will help you down the path of financial independence.
Check Out Your Credit Report and Score
Every year, Americans can check out their credit report for free from the three credit bureaus – Experian, TransUnion and Equifax. This is something you need to take advantage of if you want to get better control over your finances and adopt healthier money habits. The report will give you a reasonably good picture of how you stand financially.
Sign up for credit monitoring services (many of which are free) to get an idea of what your credit score is Another way to learn your score is to visit the bank where you have accounts. If the report and score are not where you want them to be, know that there are ways to improve them.
For example, you need to start making on-time payments while also keeping your debt-to-credit ratio low. By doing this, you can see an increase in your credit score relatively quickly. Another good way to take control of your personal finances.
Develop an Action Plan
Now, you need an action plan focused on decreasing and eliminating your debt. Get all financial account information – checking and savings accounts, mortgage, credit cards, etc. You want to know what your net worth is. Don’t feel disparaged with a low net worth. It gives you the foundation to better financial health.
Once you know what outstanding bills you have, you need to develop a budget that involves paying off your debt. Determine how much money the household brings in every month. From there, subtract your monthly expenses and figure out your disposable income.
When paying off debt, begin with unsecured debt such as credit cards. If you get extra money, apply it to one account until it’s paid off. Once paid off, focus on another account. It can be highly gratifying to pay off debt.
Establish an Emergency Fund
The budget needs to include an amount that goes into an emergency fund. The more money you can put into it, the better off you’ll be on a rainy day. Set up your paycheck to automatically route the deposit into a savings account. If you were to deposit $100 a month, you would have $1,200 at the end of the year.
Once debts are paid off, increase the amount, so you have anywhere from six-to-nine months of emergency cash in case you suffer a job loss or health issues.
Save For Your Retirement
The earlier you save, the better off you will be in retirement. If your job offers a retirement plan, be sure you’re contributing to it, no matter how small the amount. Some employers will match your contribution, which is why you need to put in an amount you can afford.
Making smart money choices is not easy, but if you want financial freedom, it’s essential to take control now. Determine how much money you have, where it’s going and how to make every dollar made work. Before you know it, you’ll have much better control over your personal finances and more money in your pocket.