Spring is a great time to clear away the clutter and freshen your living and working spaces for the year ahead. Why not borrow the idea and give your personal finances a thorough "cleaning" too?
Follow these 6 steps to achieve a bright and shiny financial picture this year:
- Collect data:
If you've been working to stay comfortably in denial about your personal spending habits, the first step is to take an unflinching look at where your money is going. There are many different tools you can use, from apps like Mint or HomeBudget to a simple spreadsheet on your computer. Super low-tech options like saving receipts, printing out bank statements, or using plain old pencil and paper can be just as effective. Choose a method that works for you and gather data for at least one month. - Take Care of the Basics:
Start by making a list of your regular bills and income money you can be pretty darn sure is coming in and going out every single month. Then, take the necessary action to make paying bills as simple and streamlined as possible. Sign up for an automated bill pay service, rearrange due dates so they are either at the beginning or the end of the month, or sign up for budget billing with your energy company. - Experiment with a Budget:
Now that you know what's probably coming in and what is definitely going out, it's time to look at what's left and where that money is going. Use your data to determine roughly how much you're spending on necessities, such as groceries, that don't take up the exact same amount of your paycheck every month. Get a weekly or monthly average for each of these categories, then subtract those from your income (subtract bills, too). Finally, decide how much you need each week in discretionary income, and how you plan to allocate anything left over. - Plan to Save:
It doesn't matter how you trick yourself into saving money; it just matters that you do it. Innovative apps like Qapital sync with your bank account and let you create "rules" like rounding up to the nearest dollar on every purchase and saving that amount that make saving totally painless. And it always feels good to keep a little cash in between the mattresses, too. Whatever you do, make it a point to make saving a part of your budget. - Enlist an Expert:
Depending on the details of your financial situation, it may be wise to enlist the help of a debt counselor or financial planner for guidance. Don't be afraid to ask for help from an expert, especially if you're in over your head. - Ask the Tough Questions:
Now it's time to go back to those bills, monthly necessities and discretionary purchases, and look for ways to improve your financial health. Do you really need all those digital subscriptions? Is there a way to reduce any of your other monthly bills? How about packing a lunch or eliminating one dinner out per month? A savings of just five dollars a week will yield about $250 bucks in a year's time--enough to use towards something that has real value.
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