Money is an ongoing issue that you will have to deal with in life. There will always be unexpected expenses, things you want to splurge on and more money to be made in the future. I definitely don’t have it all figured out but here is a list of small steps you can take towards feeling more financially comfortable.
Write down the balances for all of your bank accounts and debts in one place. Look at everything you have and owe all together. This can be overwhelming but it is a great reference tool. You can use an app like Mint to track this if you prefer digital to old school pen and paper.
Set a monthly budget. One school of thought is the 50/30/20 ratio of spending. It is 50% towards needs, 30% towards wants and 20% towards savings. Try your best to stick to the budget. Check in throughout the month to make sure you are staying on track.
Track everything you spend. Do whatever works best for you for this. It could be an excel spreadsheet, a note on your phone, an app or writing it all down in a physical notebook. You will be surprised how much it adds up to when you aren’t paying attention to your spending.
Plan for big expenses within the next three to five years. Think about goals that will require planning ahead like buying a car or a house, planning a wedding, going on a sabbatical, moving to a new place or starting a company that will require capital.
Make a $1000 emergency fund. This is for the random things that life throws at you like needing new tires, medical bills, dropping your phone in water or replacing a broken appliance.
Make a larger emergency savings fund that is 3-6 months worth of living expenses. This can seem overwhelming if you are just starting out with savings but this is a good goal in case something happens that causes you to lose your income. Like, I don’t know, a pandemic.
Go through your subscriptions and cancel any unwanted ones. There may be some services you are paying for that you no longer use. You might have forgotten about a free trial that you never cancelled.
Start an extra savings account outside of your bank for special occasions. One of my favorites is Qapital. I have goals set for different places that I want to visit as well as some random other goals. You can set rules for money to flow into this account like a specific amount each week or the 52 week rule that starts with $1 the first week then $2 the second week and keeps going for a year.
Invest in some stocks. Some companies require a large initial investment but there are some services where you can “micro” invest in smaller increments. I like Stash because you can automate savings and pick causes that you want to support. You can invest in specific companies and well as mixes that Stash puts together with varying risk levels.
Invest in your retirement fund. If your company offers a 401k matching plan, make sure you are utilizing that option. Otherwise, start a Roth IRA and contribute to it monthly. If possible, try to max out your contribution each year which is $5,500. Make your contribution automatic like other bills you have to pay so you keep it a priority.
Refinance loans you have or transfer high interest credit card balances to a balance interest card/personal loan. Hopefully if you have credit cards, you pay them off every month. Sometimes life happens and the credit cards get a little out of control. Credit card debt does not feel good if you are paying the normal rate of 18-25% interest. If you do feel like you are drowning or just want to pay off the debt quicker, balance transfer cards can give you time to pay it down with low or no interest for a specific amount of time. I’ll say it again though, if you do get credit cards, try your absolute best to pay the balances down every month. Don’t let the credit limit increase your spending over your income.
Look for habits you could cut out of your lifestyle. Think about things you can cut out of your habits like coffee, junk food, fast food, etc. At the beginning of quarantine, we were ordering delivery food often and although we still do like Domino’s every couple weeks, we try to cook more than we order out. Think about your spending habits and where you can slim a bit. Put that extra money in one of your fun savings accounts.
Hit pause on an impulse purchase. Sleep on it for a few days and assess if you still want it before completing your purchase. I have been on my phone and computer so much more in quarantine and am constantly being targeted to buy things. I definitely have fallen into the marketing that was directed right at me but have tried to stop from buying straight away. Instead, I’ll save the items or put it in the cart and then if I still care about it in a few days, I will buy it. Most of the time I forget because I didn’t actually need it.
Set a shopping ban for yourself. Pick a specific window of time and make a personal promise to not buy anything unnecessary. If you can’t trust yourself, engage a friend to hold you accountable. Text them anytime you want to buy something to ask for permission. This will help you see how much you buy that you don’t really need.
Donate money to a good cause. Support a charity you love or give to someone in need. The universe has your back and will see your good deed. It also feels good to help people.
What are other ways you manage your financial health? I really want to get to the point where I don’t stress about money but I know it will take time and budgeting and saving to get to that point. Cheers!