With new year’s resolutions/goals well underway, I thought now would be the perfect time to share a few ways to improve your finances.
Are you looking to improve your finances this year? If so, try not to be overwhelmed. I know it can seem like a daunting task to pay off debt, save for the future and constantly monitor your money, but it’s really not as bad as it sounds . You may even find it to be a fun challenge (or am I the only one that feels that way?).
1. Create a budget
If you’re attempting to improve your finances, the number one thing I would recommend is creating a budget. Having a budget it place is one of the most beneficial things you can do to make your money work for you, instead of against you.
When you do create a budget, make sure you are being realistic with the categories you have laid out. Do you really need to keep your gym membership? Can you get rid of or lower your cable TV expenses?
You should always be spending less than you make. Check out my friend Gail Vaz-Oxlade’s pie chart for budgeting, which shows you how much you should be spending in each main category.
Sticking with a budget may seem difficult at first, but I promise that if you keep at it, you will start to see positive results.
2. Track your spending
In order to create a budget, you need to know where your money is currently going. Do you know how much you spend on hydro every month? What about groceries and entertainment? If not, now is the time to start tracking what you spend. This information is essential if you want to budget successfully.
You must track every single penny you spend, including your daily $2 coffee and your random $5 dollar store purchases. Everything. Keep all of your receipts and enter them into your expense tracking spreadsheet once a week (or more often if you are able). Keep a small notebook on you, for those times when a receipt is not available.
It takes a few months to get used to tracking your spending, and I must admit, in the beginning it will probably be hard and feel like such a pain – but believe me, it’s necessary and it will be worth it. After awhile, tracking your money becomes second nature.
3. Pay off debt
Debt of any kind is detrimental to your financial health, so try your hardest to get rid of debt once and for all. This should be your number one goal. You don’t want debt looming over your head as you go about your life. It will always be a negative source of energy that will constantly wear you down.
If possible, figure out a way to pay off your debt in 3 years or less. Any longer than that and it will seem never-ending and likely leave you feeling discouraged. If this means you need to take on extra hours at work, a second job or simply scale way back on the categories in your budget, do it. It will be worth it in the end.
Think of how much better your life would be without a mountain of debt to worry about. That extra money can go towards saving for your future and enjoying your life right now.
4. Live within your means
No matter how much money you make, you always want to live within your means. The amount of money you spend every month should be less than what you bring home. If it’s not, you are just digging yourself further and further into a debt hole that may eventually become too big to climb out of.
If you can get a grasp on living within your means, you will be able to use your savings to pay off debt and put money aside for an emergency fund, your child’s education, a down-payment on a home – anything you want! Wouldn’t that be nice? It is possible!
My philosophy has always been “sacrifice now so you can live better later.” Do you agree?
5. Save for your future
Saving money is extremely important, yet many people put it last on their list. I couldn’t tell you the number of times I’ve heard people say that they only save “whatever is left over after all of the other bills are paid” (which is usually nothing at all) and that is a big no-no.
You should always pay yourself first. Think of your savings as a fixed expense that you can’t get rid of and make sure that is the very first “bill” that you pay each month.
When you start to see your savings as an important “bill” to pay, saving your hard earned cash will be easy.
6. Don’t give up
Finally, please don’t ever stop trying to improve your finances. I want to encourage you to always be learning, but don’t try to learn too much at once. Give yourself time to learn about one thing at a time and once you are comfortable with that, move on to the next. Don’t try to learn all there is to know about savings accounts, RRSPs, debt reduction, emergency funds and education plans all in one month. Pick what is the most important to learn first and go from there.
Remember that YOU are the only person that can take control of your finances. No one else is going to do it for you, so take the time to improve your finances and you will enjoy the benefits for years to come.
Everyone can do it – it’s not hard. It just takes time, dedication and perseverance. Believe, and you will achieve!