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Now that you know where your money went, you should be able to develop a realistic budget. Your goal here should be to spend money on only those things that are important to you and reduce your spending on everything else. According to WikiHow, the first thing you should do is eliminate all those unnecessary routine expenses like that drive-through coffee you have every morning or all those movies you’ve been renting.
Another area where you should be able to cut your spending is your utilities. One of the best investments you could make is a programmable thermostat that would automatically turn down the heat (or turn up the air conditioning) when you’re out of the house.
You could also cut your grocery bill just by making and sticking to a grocery list, as this eliminates impulse spending.
Automate your saving
Once you’ve tracked your spending and made a budget, you’ll know how much money you can save each pay period. The easiest way to save money is by automating it. Contact your bank and arrange to have the amount of money you want to save automatically withdrawn from your checking account every payday and deposited into your savings account. This becomes money you don’t miss because you never see it.
Treat credit card debt like the plague
There are actually good debts, but credit card debt isn’t one of them. In fact, it’s probably the worst kind of debt, due to compounding. As an example of this, let’s suppose you put a $1200 UHD TV on a credit card at 18% interest, and always make a minimum monthly payment of just $110. In this case, it would take you 12 months to pay off the debt and cost you $120 in interest!
Pay your bills on time
There are five factors that are used in calculating your credit score. Your credit history is the most important of these as it accounts for 35% of your score. This makes paying your bills on time critical. If you’re late on just one payment, your score could get dinged. In fact, according to the credit bureau, Equifax, “one 30-day delinquency could cause as much as a 90- to 110-point drop on a FICO Score of 780 for a consumer that had never missed a payment”.
The best way to avoid late payments is to automate as much of your bill paying as possible. This will make your life much simpler. You should be able to set up automatic payments through your bank, or if not, by going to the companies that bill you monthly. If you do this, you’ll probably need to spend only about an hour a month managing your bills because you’ll have everything on autopilot.
Get the big purchases right
It’s a waste of time to spend three hours trying to figure out how to cut your grocery bill by $10 a week if you then go out and spend $40,000 on a new SUV. The most important purchases to fixate over are the big ones, which are usually housing and transportation. If you overextend yourself in either of these areas, you’re almost doomed to fail financially.
Save a bit more every year
The trick here is to increase your savings a bit every time you get a raise. That way, you won’t even notice that you have more money. One of the biggest killers in personal finance is what’s called “lifestyle creep.” It’s tough to not increase your lifestyle when you get a raise, but it’s how you build wealth.
There are some other good ways to save money, and the following video has 10 tips that should help you do better.
Personal finance in summary
You should now see that managing your personal finance doesn’t have to be a big mystery. You just have to do your research to increase your knowledge about it. If you follow the seven tips you’ve just read, you should find it to be pretty simple. In fact, if you follow just two of them – tracking your spending and developing a realistic budget – you’ll have your personal finance under control, and your life should be much simpler.