Did you know that 75 percent of American households carry some form of debt? Or, that nearly 40 percent of that debt is on credit cards? If you find yourself struggling financially, these stats may not surprise you.
You’re also, no doubt, well aware that living under the shadow of debt can prove stressful. It can even impact your ability to plan for the future and enjoy your best life.
Fortunately, debt doesn’t have to be an integral part of your existence. Especially when you develop better money management skills.
Not sure where to start when it comes to managing personal finances? Read on for five tips to help you get out of debt and start building a future.
1. Draft a Budget and Stick to It!
While this might sound like a financial cliche, there’s nothing like creating a budget to hold yourself accountable.
Taking the time to craft and stick to a budget will help you develop a better sense of clarity and transparency when it comes to where your money goes. It’ll also help you better manage your finances so that get your money right.
Where should you start? The fundamentals of a budget include understanding your outgoing expenses and your incoming revenues.
2. Know What You’re Making
If you stopped somebody on the street and asked them how much they make each month, I’d bet they have an immediate answer. Would you?
That said, do you know how much income you have left once all of your monthly expenses have been deducted? This figure proves far more difficult for most people to tally.
Start by knowing exactly what you do bring in. Then, subtract your expenses. For small business owners and freelancers, you can make this process easier by relying on the services offered at paystubs.net.
3. Deduct Your Expenses
Most people have little to no clue how much they rack up in monthly expenses. Yet, this figure is crucial to understanding where you’re at financially and why.
When it comes to the best way to manage money, sit down and make a detailed list of what comes out of your bank account (or gets charged to your credit card) each month. Then, deduct this from your monthly income.
If you end up with a negative number, changes need to be made. You’re expending more money than you’re taking in, which is a guaranteed recipe for debt disaster.
And if you end up with a positive number? Then, congratulate yourself. You’re on the right track.
You spend less than you earn, but don’t stop there. Look at ways to reduce your expenditure even more. Also, consider opening a savings account or investing this money so that it works even harder for you.
4. Cut Unnecessary Expenses
As you pour over your monthly expenses, look for ways that you can cut back. Most people get nickeled and dimed into poverty.
In other words, it’s not necessarily the huge expenses that leave you with a negative checking account balance. Rather, it’s the little stuff such as a daily Starbucks habit.
As you find more ways to cut back, you’ll be amazed by how quickly your savings accrue.
5. Prepare for Retirement
If you’re currently living beyond your means, the thought of putting aside 10 to 15 percent of your monthly income might feel overwhelming. But it’s crucial that you plan ahead for retirement.
After all, more than 25 million Americans over the age of 60 prove economically insecure. To avoid struggling with the challenges of housing, healthcare, and more as you age, start planning and building a retirement fund now.
Better Money Management Starts Now
We tend to focus on money as a scarce commodity. In reality, the only truly limited commodity is time. If you fail to change how you manage money now, more time will go by, and you’ll end up in a deeper financial hole.
Don’t let this happen. Use the tips above to start better money management habits today.
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