Most of us would love to improve our financial situation. Not all of us are living paycheck to paycheck, but we would like to be doing better for ourselves.
Sometimes we get hit by surprise costs and going to get a simple loan online, and for the most part, this is okay. However, on repeat it can end up being detrimental to our financial health.
Too many small loans can cut into us over time. We would all much prefer it if we never needed to take out another loan again, but that is not really realistic for most of us.
That being said, you can improve your financial situation, even a little, and there is a trick to it. Better money management is half of the battle. Understanding how you can influence your finances, where they go, how you spend and so on, is a big step to better financing.
So, what are 5 tips that will aid you in improving your finances? We have these 5 tips for you today.
Improving Your Financial Health
When we are talking about our finances, we are typically referencing our personal finances. This means how we manage our money and plan for future endeavors. All our financial decisions will end up having an effect on our financial situation overall.
This is why we should always be considering what we are doing in our lives, in order to better improve our financial habits and overall monetary health.
So, this is why we have 5 tips for you, using these 5 tips could be a total game changer for you!
What Can You Do?
For some of us, who feel stuck in a rut financially, it may feel like there is nothing you can do to change your situation. Yet, the smallest change could have a ripple effect that will forever change your life.
It can be easy to feel stuck when your finances are not reaching all the areas you need them to. Our five tips might just change that for you!
#1. Budgeting
First of all, you need to start budgeting. This means starting by evaluating your wealth.
Everyone has money coming in and going out, but for most of us, we don’t stop to think how much, and where it goes. This is where you need to first focus.
Instead of ignoring how much goes in and comes out, start budgeting. Know what goes into your accounts every month and how much comes out. The amount coming out should be less than what goes in.
Doing some number crunches will help you to better assess how you can reach your long term goals.
Start off by understanding your net worth, this means any assets you owe and money that you have incoming every month. Subtract anything you owe to get an accurate figure of your net worth.
When you start budgeting you want to first ensure that your essentials are covered. This means rent/ mortgage, utilities, insurance, and groceries, the basic cost of living. After this you should consider debts that need repaying, and finally savings.
However, we will look at these more later.
Consider splitting your costs 50/30/20 or 70/30/20, depending on your income and ability. In these examples the first number is living costs, the second number is to cover debts, and the third for savings.
However, these are guidelines, and you can move them around, or use your own figures depending on your own situation.
#2. Keep An Eye On Your Credit
You should also be considering your credit. We do not mean credit cards, but credit score.
You should be aware of your credit score and credit history and be aware of how it will influence your financial life. Your credit history is a file that tells lenders about you and lets them know how you manage your money.
It will tell lenders how much of a risk you are to take on, and this will influence their decision to give you a loan, and what kind of interest rate you will get when you do get a loan.
#3. Pay Off Debts
Paying off debts is a good way to change your financial situation. You want to pay off debts as soon as you can. If you have multiple debts you could consider consolidating them into a personal loan.
This will help as it will result in one chunk loan payment with a singular interest rate, rather than many with varying interest rates.
Debt consolidation loans make it easier for you to manage, giving you a better idea of your overall financial standing, helping you plan better and anticipate what is coming out of your account.
#4. Build Up Savings
Savings is another thing you want to start thinking about more. Savings are not just for vacations, college, weddings and nice events. Savings are also ideal to have as they can serve as an emergency fund, being able to be the thing that can stand between you and debt.
Having an emergency savings account with a fair bit of savings in can be the thing that saves you from having to take out a loan when disaster strikes.
Even if you cannot afford to contribute a lot, with enough interest in your account, you could easily put a couple of dollars in there each week and overtime it would accumulate.
If you saved a dollar a day, in five years you could have near $1500 saved!
#5. Wants Vs Needs – Prioritize
Finally, it is important to know the difference between what you need and what you want.
Needs are food, water, a home, electricity, and gas, as well as a lack of debt and financial security.
Do you need a vacation? Do you need a new car? Do you need a coffee from Starbucks every day or can you just make one at home?
Knowing what to prioritize can save you a lot of money!
