Getting back on track financially can seem like a daunting — even impossible — task. As the debt mounts — and the paycheck stays the same or even dwindles — bankruptcy may seem like it’s in the offing.
Pulling yourself up and out of financial troubles requires time and hard work. But it’s not impossible to learn how to manage your money better, and it doesn’t require a degree in finance to figure it out, especially with a debt management counselor who can advise you along the way.
Sometimes it’s hard to admit just how much debt you have, but you need to get brutally honest for anything to get better. Take a financial inventory and tally up all the numbers, so you know exactly where you stand with lenders. Dive into your expenses, so you can start looking for spending to cut. Consider your earnings and look for new ways to supplement your paycheck if you can. Get your credit score and find ways to boost it.
Map it all out in whatever way is best for you — on a giant white board, on paper or through an app. Once you have a full picture of where you are, you’ll be ready to determine where you need to go and how to get there. This is an important step in learning to manage your money better!
Now that you’ve already taken a hard look at your debt, expenses and earnings, it’s time to consider your financial goals. Is it to pay off all your debt? Is it to save up for a home down payment? Is it to help your child cover their college expenses?
To make any of those dreams happen, you’ll need a budget — essentially a plan for your money so that you don’t overspend and you can start shuttling your earnings toward those dreams of yours.
CESI’s personal finance guide has an entire chapter on how to build a budget, including what to do with excess income and how to handle excess spending.
Checking accounts and savings accounts are critical parts of anybody’s financial health. With a checking account, you can pay your bills and cover other necessities. With a savings account, you can funnel money away from your checking account, so you’re not tempted to spend it all.
Check in at your bank to make sure you have the right kinds of accounts. A checking account, for example, should have little to no fees, low minimum requirements, unlimited transactions and free ATM access.
Savings accounts should include a high interest rate, so you earn more money on top of what you’re saving. Your bank also should allow you to divide your savings into sub-savings accounts, where you can set aside money for specific goals (such as paying off debt or a new home).
If your current accounts come with fees and other costs, it’s time to look elsewhere for better service. Small fees can add up to a lot of money over time.
Want to manage your money better? Try to never pay full retail price for anything. Look for sales on everything you need — from food at the grocery store to clothes at the mall. When contemplating a bigger expense, such as a new car, furniture or appliance, ensure you’re making the best use of your money by planning ahead and shopping at multiple stores to compare prices and find the most affordable option.
And think hard before saying yes to new monthly costs — whether it’s a streaming service to watch movies at home or a new bedroom set. It’s easy for those smaller payments — $8 a month here and $25 a month there — to accumulate. Pretty soon, your monthly bills can become far more than you can afford.
There are a number of ways to tackle debt — from simply cutting your expenses so you have more money to direct to your bills to the snowball debt method, where you pay off the smallest debt first.
Whatever you do, if debt payment is your goal, work hard to stop your bills from growing even bigger. Limit the use of your credit cards and start living within your means. That may mean dramatic changes to your lifestyle but, in the long run, those changes will be worth it to help you achieve your financial goals and manage your money better.
A plan that helps you manage your money better includes building savings or an emergency fund to cover expenses if you lose your job or face a medical emergency. And it should also include adding to your retirement fund so you don’t have to work forever.
Learning to manage your money better is possible, but these strategies will only work if you’re truthful with yourself, you monitor how you’re doing — and you reverse course when you go astray of your plans. Monthly, weekly and daily check-ins with yourself and your finances are critical to ensure you’re on the right track.
The CESI Team is committed to helping you reach your financial goals. If debt keeps you from living the life you dream of, contact us for a free debt analysis today and get started on the road to a brighter future!
Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
CESI is NOT A LOAN COMPANY