If you are among the many that “wing it” each month paying their bills, you are setting yourself up for a financial disaster in the making. Unfortunately, when you don’t have a system in place for paying your bills, it’s easy to miss one or two completely. Luckily, you can turn your life around by establishing a budget and identifying where your money is going and then finding ways to improve your bottom line.
If you find yourself caught up living paycheck-to-paycheck you know all too well how difficult it is to stay afloat. One emergency like a car repair or an unforeseen sickness can cause your finances to crumble quickly. You can turn to a family member or complete a fast cash loan application from a lender to cover the immediate setback but, this isn’t a long-term solution. However, making changes to your current way of living financially can prevent this type of scenario from repeating itself in the future.
Creating a Budget
Creating a budget is easy. Sticking to it is the hard part. Start with a clean sheet of paper and make a comprehensive list of all your monthly obligations including your mortgage or rent, household utilities, cable, cell phone, loans and credits cards. Then add in an estimate of other expenses like gas, food, school and essentials. When you’re done, take that total and deduct it from your net income each month. You can use the money left over to add to your savings account, pay down debt or even enjoy a dinner out.
Lowering Your Monthly Debt
When you create your first budget you get a clear accounting of where your money goes. If you find that a large portion of your money goes towards outstanding loans and credit cards focus on reducing the balances to free up extra money. Thankfully, there are several ways you can achieve this. Some of the debt, such as your car loan or a mortgage, you can refinance. You may even get a better interest rate, but at the very least you can lower the monthly payment, sometimes by a few hundred a month. As for the credit cards you can apply for a new one that offers balance transfers interest free for a period of time. This allows you to pay off some of your credit card debt without paying additional interest and fees.
Ultimately, if you have a lot of debt you need to find ways to spend less. This can be a difficult task, especially if you shop on impulse. The good news is that with a budget in place you now know what you can spend and can work towards living within your means. If there’s something you want, save for it instead of putting it on a credit card. This way you’ll pay only what it costs and won’t tack on another bill to hurt your monthly budget.
Plan for the Future
Being smart with your money includes allocating a portion of your income towards your retirement. If the company you work for has a 401K and gives you the option of matching their contribution, take advantage of it. If you are a freelancer, then open your own retirement savings account and commit to it monthly.
Establishing and sticking to a budget puts you in tune with your financial status and gives you the ability to make the necessary changes to enjoy a healthy and fruitful financial future.