It’s no secret that managing your finances can be stressful. And while money can’t buy you happiness, being financially stable can make your life much easier. But how exactly can you become financially stable?
From creating a budget to having the right account open, there are steps you can take to achieve financial freedom. Although managing your money can be taxing, these stress-free tips can uncomplicate the process:
1. Make One Decision at a Time
According to research, over 60% of Americans feel anxious when they think about their finances. While managing money can be overwhelming, it can be even more stressful if you try to figure everything out at once.
Instead of making multiple decisions at one time, focus on a specific goal. For example, if you want to pay down debt, focus on that rather than saving money for a tropical vacation. Once you achieve that goal, you can move on to your next one.
2. Apply for a New Credit Card
This might sound like a counterproductive way to improve your finances. Applying for a credit card means you’ll be subjected to a hard inquiry which could actually hurt your credit score. Plus, with credit cards comes the possibility of credit card debt. Using a credit card is one of the most common ways to build a credit history and increase your score. So, what should you do?
Instead of applying for a traditional credit card, opt for a secured credit card. Secured credit cards work like traditional cards. But to get approved, users put down a cash deposit equivalent to the card’s limit. This deposit works as a safeguard. If you miss a payment, the bank will pull the money from the deposit so you won’t accrue debt.
Keep in mind, you don’t want to constantly miss your payments. Like a traditional credit card, the only way your credit score will improve is if you pay your bills on time.
3. Make Sure You Have the Right Account for Your Needs
The only way to get a better handle on your finances is by making sure you have the right tools. We’re talking about the right bank accounts to help you reach your financial goals–not a screwdriver or hammer. You need a dedicated checking account for expenses, a savings account for rainy days, and an investment account for retirement.
Let’s say your goal is to grow your savings. That might be tricky to do if you don’t have a savings account open. Sure, you could keep all your funds in your checking account. But savings accounts can be incredibly beneficial. For one, they acquire interest over time. You have the opportunity to earn more money in your savings account than letting it sit in your checking.
4. Create an Easy-to-Follow Budget
Creating a budget can be stressful, but it doesn’t have to be if you choose the right budget for your lifestyle. To do so, make sure you understand why you’re creating a budget. Are you creating this budget so you can buy your first home? Do you want to pay off your student loans? Do you want to treat your family to a nice vacation?
Once you know your goal, figure out how much money you need to achieve that goal. Then, take a look at your expenses. How much money do you spend a month on necessities (i.e., car insurance, rent, utilities, etc.) Use that number alongside the amount you’re trying to save to create a monthly (or even weekly) budget for yourself.
Don’t forget about the wiggle room. While you don’t have to spend money on extras like a weekly yoga class, you should every now and then. And if you have the finances to afford it, make some room in your budget.
5. Stay Away From Temptation
While you can’t avoid spending money all the time, do your best to limit yourself. For example, instead of shopping online, step away from your electronics and go for a run or a bike ride.
You can also leave your debit and credit cards at home and stick to using cash only. A study from the Consumer Financial Protection Bureau found that people spend less money when they pay with cash. If you’re trying to stick to your budget, use cash so you can better keep track of where your money is going.
6. Ask for Help
Managing your own finances isn’t easy, which is why so many people turn to financial experts for help. Whether you need a realistic budget or you want help creating a strategy to become debt-free, ask for help. These days, you don’t have to go far to speak with someone. In fact, you don’t even have to speak to an individual. Thanks to budgeting apps, you can use technology to keep track of your money, credit score, and more. Some of these apps will even notify you in the event of a suspicious transaction so you can report it to your bank as soon as possible.
7. Watch Your Progress
As you make these changes, it’s important to track your progress. Doing so helps you make sure it’s working for your lifestyle and helping you get closer to your goals. Maybe you started with $100 in your savings account, but after following your budget, that number has tripled.
Seeing your progress can help you stay on track and remind yourself exactly why you’re working so hard. Keep in mind, the opposite is also true. If after a few months your savings account hasn’t changed, you can alter how much you save.
According to research, two-thirds of Americans would struggle to find $1,000 in the event of an emergency. Managing your finances is crucial to make sure you’re prepared for a financial crisis and to improve your day-to-day life. After all, there’s nothing more stressful than constantly worrying about money.
While you can’t always change your income, you can manage your finances in a way that fits your lifestyle. By integrating the tips above, you’ll improve your financial health.