Benjamin Franklin was quoted as saying, “a person should be aware of little expenses.” He concluded by saying, “a small leak will sink a great ship.”
Your life may not revolve around money. However, money can be helpful in paying expenses and improving the quality of your life. Most people, objectively speaking, struggle financially. Many are literally living paycheck to paycheck. When a person is able to get their finances under control, they have more freedom, they have more time, and they are able to pursue the things that they want to pursue as opposed to being controlled by the things they need to do to make money.
Two things that keep people feeling financially oppressed are the debts and obligations that they have. As a famous song once said, “Many people find themselves with a lot more month at the end of the money.” It’s understandable that people are interested in figuring out how to improve their finances. But life is busy, and it easy to get sidetracked and forget how important it is to take steps to have a solid financial life.
The following are some things that might help:
Have Clear Financial Goals
Part of having clear financial goals means making a plan. If you have financial goals without a plan, you basically have an idea. It’s not good enough to say that you want to make more money or that you want to save more money. You have to have measurable and actionable ways of achieving this. You need to set long-term and short-term goals.
A short-term goal may be to pay off a small credit card that you have. A long-term goal may be to see yourself out of debt in 10 years. You should write your goals out using real dollar amounts with set dates. Don’t just say that you want to make more money by the end of the year. Say exactly how much money you want to make. Is your goal to get out of debt? How much debt do you want to pay off and when? With a defined date, you have something to move toward.
Set Financial Milestones
This goes hand-in-hand with having financial goals. Milestones are the building blocks that make your goals come true. Let’s say, for example, that you have $5,000 of debt that you want to eliminate over the next year. How much money do you need to put toward your debt every single day, week, or month to achieve that goal?
Milestones are important because they take the big picture and break it down into something that is smaller, more realistic, and easier for you to obtain. For example, if your goal is to pay off $5,000 of debt in one year, you will need to put $96 a week toward your debt. This is a lot easier to manage than the ominous figure of $5,000.
Repay Your Debt First
Most financial advisers recommend that you first pay off your debt before trying to save or invest aggressively. Paying off your debt allows you to lower stress. Paying off your debt has a lot less risk. It makes you able to withstand personal emergencies easier. If there is an economic recession or depression and you are debt free, you have greater flexibility and the ability to increase personal happiness.
Start by paying off high interest credit card debt and other liabilities. Some people may choose to prioritize student loan debt because it’s difficult to discharge in bankruptcy. If you have had an unexpected emergency situation that led to securing payday loans provided by direct lenders, this debt should also be on the top of your list to pay back to avoid incurring extra interest fees.
Live within Your Means
Living within your means is when you know how much you make, and you stay within that budget. It doesn’t simply mean knowing what your salary is or what your hourly rate is. It means knowing the net income that’s on your paycheck. It also means keeping track of when you get paid and how that correlates to when your bills are due.
Next up is spending less money than you bring in. If you can reduce your spending to fit your income, you will be ahead of the game. This may mean creating a budget to keep track of your spending. If you have tried budgeting before and it didn’t work, try again. Sometimes it takes a few different budgeting methods until you get it right.
Boost Your Income
If your expenses are bare minimum and you are still struggling to make ends meet, you may need to take steps to boost your income. It doesn’t necessarily mean that you need to get a second job. Many people have been able to boost their income by taking advantage of the gig economy. They create side income sources to supplement their income.
The basic concept to always remember is that you want more money coming in than going out. If you can achieve this balance, you are likely to see your financial situation improve and become more stable.