Everyone’s personal finance journey is unique, but the fundamental tools remain the same. At the end of the day, we want to ensure we’re setting ourselves up for success and preparing our bank accounts for the unexpected.
No matter your financial situation, these five steps will lay the groundwork for resourceful spending and managing your personal finances.
Address Any Debts
One of the simplest ways to understand your full financial picture is to list any debts or outstanding payments. This includes the primary amount and interest of each payment. With this tangible information on-hand, you can begin to strategize on how best to pay it down.
When it comes to making payments, avoid paying only the minimum amount, this will only make it harder to climb out of debt. It can feel daunting to look at how much you owe — you may find it helpful to use an app tailored for debt payments. These tools can be incredibly powerful methods of keeping track of your finances.
Subscribe to the 50/30/20 Plan
The 50/30/20 budgeting tactic is an established tool for budgeting smarter. It divides your income into three categories and sets you up for responsible spending — 50 percent is taken for fundamental expenses such as insurance, utilities, and rent or mortgage payments; 30 percent is set aside for entertainment including monthly subscriptions or dining out; the remaining 20 per cent is allocated to any savings accounts or debt payments you may have.
Trim Your Taxes
Making sure you’re paying only what you’re required to when it comes to your taxes is an important detail. Dividing this into two categories — short-term and long-term deductions — will help you stay organized.
Short-term deductions would fall under annual rebates such as childcare, or medical costs. When it comes down to filing taxes, we don’t often realize the expenses we’ve accumulated that are deductible. Additionally, keeping all your receipts will help lay out all of your spending and you can research where you’re able to maximize your return potential.
Your long-term deductions would fall under savings accounts geared toward retirement, which can offset what you must claim. These incentives not only benefit you when tax season rolls around, but you’re also investing in your future and creating a healthy financial nest egg when you reach retirement.
Look at Lending Options
For short-term relief it may be helpful to take advantage of payday loans — unlike traditional lending options, they offer no red tape if you’re working with the right lender, and they provide a more efficient route to financial assistance.
This temporary fix offers a solution to those struggling with steady income, and it requires only basic financial details in order to qualify. Of course, this type of lending should only be used sparingly and for short term needs. Take a look at these tips on building your savings to educate yourself on when and how to use short term loans responsibly.
Save for a Rainy Day
Unexpected expenses are almost guaranteed to arise at some point in our lives, and an established emergency fund can ease the worry when the time comes. Building this foundation requires prioritizing saving and making strategic spending choices. Rather than waiting until the end of the month to save left-over income, make a point to put that money aside when you first receive your paycheck. If you receive a raise or a bonus, put those extra funds into your savings account rather than treating yourself in the moment.
When you create your emergency fund, look for a high-yield savings account to store your money. Additionally, there are benefits to opening multiple savings accounts. By dividing your accounts into specific financial goals, you may find it easier to navigate as you begin to save.
Following these tips will allow you to manage debt and save for the future. Good luck in all your financial planning!