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It doesn’t matter how much money you earn, you must learn the basics of financial management in order to make ends meet each month. Balancing your needs and wants with the money you have can be a challenge but with a few simple rules to follow, there is no reason that you can’t succeed.
There are 3 basic rules you should stick to.
- Be smart with your debts
- Save regularly
- Live within your means
Here’s what you need to do.
Deal with Your Debt
Everyone has some form of debt but the kind of debt you have is an important distinction to make. Borrowing money to invest in a home or your education is a good way to get an asset you need to improve your lifestyle as long as you can keep up with the required monthly payments. However, it is also very easy to get into bad debt. Bad debt usually happens when people start living outside their means, borrowing money they can’t afford to pay back.
While getting into bad debt can feel a bit embarrassing, burying your head in the sand is the worst possible thing you can do. You must form a plan to repay your debts as soon as possible and a chapter 13 bankruptcy lawyer may be able to help you set your plan in motion.
Live Within Your Means
One of the most difficult finance rules to master is the art of living within your means. Essentially, this comes down to spending less than you earn but this is certainly easier said than done!
Before you can hope to achieve this goal, you should work out what your income actually is. If you have a regular paycheck, that makes things easier but if you are a freelancer, you should look at your rough average for the last year or so. You might also think about taking on a side job to increase this number.
When you know what you are earning each month, you should start allocating budgets for each area of your life. This will help you to see what you are spending now and where you might be able to save. The more you know about your habits, the simpler it is to get your spending under wraps.
Sort Your Savings
Adding to your savings on a regular basis is the best possible way to build up your emergency fund, save up for a holiday and give yourself a rainy day fund. However, it is important that you get the balance right here: under-saving will mean that your fund doesn’t grow fast enough but over-saving could impact your quality of life.
The best way to save is to work out how much you can put away each month without feeling the pinch and then automating this saving. The less you have to do in order to save and the easier you make it, the more likely you are to succeed. Then, if you have a little extra left over at the end of the month, you can always put this away too (or treat yourself!).