The good news is improving your financial health can be accomplished with a few small, simple actions.
4 Simple Steps to Keeping Your Spending, Saving, & Financial Planning on Track
- Author: Dorothy Watson of Mental Wellness Center (edited by Cassie Jewell, Blog Author)
If you want to ensure that you make smart financial choices, you need a budget. Creating a simple budget is one of the most effective ways to manage your finances and stick to your goals.
Be sure that when creating a budget you’re realistic about your spending habits (i.e., non-essentials that are important to you, things you don’t mind splurging on, the cost you’ll pay for convenience, etc.). If your budget is unrealistic, you’re unlikely to stick with it. You also need to be flexible enough to make changes to your budget as your finances… and life… evolve.
Here are some budgeting tips:
- Learn about budgeting systems (i.e., zero-based vs. the envelope system) and go with the system that works best for your short-term and long-term financial goals.
- Create a budgeting spreadsheet to track and manage your finances.
- Follow the 50/30/20 budget rule for after-tax income: 50% for essentials, 30% for non-essentials, and 20% for savings.
- Be sure to plan for both monthly and non-monthly expenses.
- Set aside at least $500 for a starter emergency fund (which should be kept in a high-yield savings account if possible).
- Decide which non-essentials (i.e., travel, gifts, dining out, etc.) are most important to you, and set aside the funds.
- Get your family’s food budget under control with these five simples steps. (For more info about food costs, read what’s eating your money, an article from Earnest.)
- Save money while becoming more financially savvy with free financial and budgeting apps.
- Reduce spending to increase your budget’s available balance. (For example, if you’re mechanically inclined, consider handling your own car repairs. You can save money with Ride Digest, a free online resource for car owners.)
The sooner you start building your savings the better. Even putting $20 a week into an account that’s reserved for emergencies or long-term goals (such as a the purchase of new tech gadget) will go a long way toward growing your finances, making you more financially secure, and ensuring that you stick to a budget.
- Identify your short-term and long-term savings goals. (For example, a short-term goal might be to pay off a credit card in the next couple of months while a long-term goal might be to save 20% of a down payment for a home.)
- Open a free checking account.
- Save smarter by learning how to select and open a personal savings account.
- Consider opening a certificate of deposit (CD) for a higher interest rate than your typical savings account.
- Use an investment app such as Acorns to invest your ‘spare change’ by rounding up as a small way to boost your finances.
- Build your savings on a low income with these 13 tips from Clever Girl Finance.
- Try a money-saving challenge to improve your finances.
- Reduce spending on essentials.
- Control and reduce spending on non-essentials.
- Pay off a credit card balance and save on interest with a 0% APR balance transfer rate introductory deal.
- Check to see if you qualify for student loan forgiveness.
- Start saving for retirement as soon as possible (preferably in your 20’s!) On average, a person requires at least 70% of their pre-retirement salary to live comfortably.
Don’t Overpay on Insurance
Many people consider insurance in any of its forms a necessary evil, but because it can protect your finances as well as your most valuable possessions such as your home and vehicle, it’s an important resource. However, this doesn’t mean you should pay high premiums on a policy that gives you more coverage than you need.
Take some time to review your current insurance policies, and then do some research to see if you can find better rates from a different lender for a smaller (or even the same size of) policy.
- Read about why you should buy life insurance when you’re young.
- Learn how you can save on car insurance.
- Use this free tool to find affordable health insurance by state or learn more about health insurance coverage options here.
- Take advantage of bundling insurance plans.
- Request a free consumer disclosure report to view past claims before buying a home or car to avoid overpaying on insurance.
Be Strategic When Buying a Home
Buying a new home can enhance your finances and financial standing by providing you with a valuable asset. Before you buy a home, though, you’ll benefit from researching the process and all of the expenses involved, such as the down payment and closing costs.
Tips for buying a home:
- Take an online or in-person homebuyer education course.
- Learn about government programs, including loans and grants, that may help you pay for a new home.
- Get your free credit score with Credit Karma. You can also request your credit report every 12 months at no-cost with AnnualCreditReport.com (Equifax, Experian, and TransUnion). What’s more, your bank or credit card company may provide free credit monitoring.
- Take advantage of no-fee tools like this online homebuyer’s checklist or this home affordability calculator from Redfin.
- Decide how much to spend on a down payment for a home.
- For the lowest rate, compare and apply to multiple lenders.
- As a homeowner, consider refinancing your mortgage as the value of your home increases to save on interest.
While achieving financial stability is no easy feat, you can reduce stress by utilizing the above tips to keep your finances in check… and to move yourself closer to your financial goals!
What are your best tips for financial wellness? Post your tip in a comment!
Guest Author: Dorothy Watson
Dorothy Watson grew up with a single mother who suffered from bipolar disorder. Her mom wasn’t properly diagnosed until Dorothy was about 12 years old, so she saw her mom struggle for a long time. Since she has seen how hard life can be for people whose mental health hasn’t been properly addressed, she is an advocate for mental wellness. You can learn more at Mental Wellness Center.