If you are bound to resolving all your financial woes, you need to have a mindset that says “I will be free from debt now”. Yes, it could be easier said than done, but with sheer determination, nothing can’t be achieved. Let me help you with few steps to finally resolving your financial woes!
The first and most important step in developing and following a financial plan is to examine your attitudes about money. Ask yourself the following:
- Are you ready to accept responsibility for changing your financial situation?
- Do you believe that you can and will change the way you make financial decisions?
- Can you identify at least one benefit you hope to gain by changing your money management behavior?
If you positively respond to these questions, then you are ready for and able to start your path to financial wellness.
Assess your financial situation
Start your journey with a self-assessment designed to motivate you. Completing this simple quiz can help you assess your current financial situation.
Clearing out financial mess
Getting yourself financially organized is a great way towards financial wellness. But before you clean up, you should also know that some things are worth holding on to. Note on the following to keep:
– Grocery receipts and other nondeductible expense receipts and statements can be destroyed after they have been recorded for budgeting purposes.
– Paycheck stubs should be checked against your W-2. If it’s a match, you can toss them.
– Canceled checks should generally be saved for three years. Keep those related to your taxes and business expenses permanently.
– Utility bill stubs may be destroyed after recording, however, you may wish to hold onto these for a year to compare monthly costs.
– Household documents pertaining to buying, selling or improving your home should be kept as long as you own the home.
– Receipts from major purchases should be kept as long as you have the item.
– Credit card receipts can be destroyed once you have reconciled with your monthly statement. Additionally, credit card monthly statements can be destroyed on an annual basis.
– Individual tax return documents should be kept for seven years, according to the Internal Revenue Service (IRS). The IRS has three years from your filing date to audit your return if it suspects good faith errors. However, the IRS has six years to challenge your return if it thinks you underreported your gross income by 25 percent or more.
Finally, before taking out the trash, be sure that all identifying information has been destroyed to avoid your personal information falling into the wrong hands.
Approaching “adulthood” can be rough, especially when it comes to finances.
Budgeting your first salary to pay your bill and other expenses can be tough, especially if you are also covering to pay your student loan.
It may be tough to start but it is better to learn the ropes of proper money handling at a young age. It’s common for young adults to be burdened with debt, and while not all debt is necessarily bad, it’s important to prioritize repayments. Better to pay down your debts with high-interest rates first. Loans that carry interest rates above 7% can be a major financial drain over the long run. Credit cards are often the culprit. Do nothing until that is paid off. Personal finance experts tend to stress the importance of having an emergency fund to cover unanticipated expenses to avoid long-term financial damage. If you are not set up to tap cash for something, it can derail you financially if you put it on credit card. The original expense can bloom because of interest.
Once high-interest debt is history, start stashing away money for emergencies. You can start by saving a 3-month cushion for unexpected expenses or emergency cash. Having a stash of cash gives you more freedom and control over your life, whether it’s leaving a bad job, starting a new career or exploring a new hobby or business idea.
You may also want to figure out what you really want with your finances. Create concrete goals can make a financial plan more realistic and successful. Setting goals that are “time-lined”. This will allow you to tailor your budget and set specific savings and spending targets.
You also need to be time conscious. So the earlier you get started, the better. First, the money comes out of your paycheck before taxes and also grows tax-free, so you won’t owe any taxes until you withdraw it.
Many of us leave the bulk of our assets in cash, which means they aren’t earning much from it. Explore the possibilities of “investment”. Some of us can be more hesitant when it comes to investing. But we have to know that fear can mean missing out on opportunities to grow and create wealth. Keeping a diversified portfolio with broad market exposure can help alleviate investing jitters. To get started, try to invest 1% of your paycheck and increasing the amount regularly. Investment can mean: “Pay yourself first”. Do it every paycheck, and you will never notice how far has your initial investment have grown.
As we approach the second quarter of the year, let’s try to shy away from the mistakes done and start a clean slate by focusing on what can be done now to improve the financial situation. For most us, a better quality of life translates to more money. Here are few tried and tested tips to share with you:
Create a Budget
Budget can become overwhelming, but if you make a monthly budget and stick to it, you can identify areas where you overspend and save big by controlling spending or simply by using money wisely. Write down monthly income (after taxes) and itemize monthly bills and other expenses. Don’t forget about the “little” things like daily coffee or fast food lunch – they add up.
“Spring Clean” Your Finances
You can dedicate an hour over the weekend to review all your current bills, or, you can thoroughly review bills as you receive them, keeping an eye out for hidden fees and services you don’t need or want. If you find questionable charges, investigate them.
Maximize the Value of Coupons
Learn about the potential savings associated with extreme couponing. Pick up a Sunday paper, browse through all the ads to find coupons on items you regularly buy. But don’t stop there. Keep an eye out for store sales on items you buy the most, and incorporate your coupons to increase the savings.
Reduce Entertainment Expenses
Entertainment is a necessary expense. However, it’s also necessary to avoid overspending in this area, especially because it’s easy to get carried away. Check one of the many daily deal websites and see if you can find discounts on places that you visit or would like to. You can often save 50 percent on dining and local activities simply by planning ahead and printing a voucher.
Commit to Fresh Foods
Buying processed foods is more convenient, but buying fresh will save you money and improve your health. You may need to spend more time in the kitchen, but if you make meals in bulk and freeze for later use, you can enjoy the health benefits and savings of eating fresh without “slaving over the stove” everyday. Visit your local farmers markets and make it a point to visit them weekly. You’ll find the highest quality of fruits and veggies at low prices.
Once you’ve identified and implemented ways to save daily, direct those savings towards paying off debt so you can reduce interest charges and improve your credit. And if you haven’t yet started saving for retirement, now is the time.
When it comes to your finances, a few dollars a day can make all the difference in reducing debt, saving for the future, and improving your overall quality of life. Everyone has the power to change, and saving 50 cents at the grocery store could be your first step to a life of financial freedom.
Budgeting is simply the act of working out how much money you’ve got coming in (EARNINGS) and then as accurately as possible figuring out how much you have to pay out (EXPENSES) on fixed costs such as rent, bills and so on to then come up with how much you’ve got left to spend on everything else (DISPOSABLE FUNDS/INCOME).
In simple math terms basic budgeting looks like this:
INCOME + FIXED COSTS = DISPOSABLE INCOME
Budgets can be calculated over a variety of time periods, such as a month, term or even a whole year. Most students have very fixed incomes made up from their Maintenance Loan or Grant, plus whatever they may get in the way of parental support or from a part-time job, so calculating income is usually pretty easy.
The trick comes when trying to figure out your expenses, breaking it down into the fixed costs that are known (for example rent is a ‘known fixed cost’), those fixed costs that are estimated (such as utility bills which can be guessed at based on how much was paid in the previous year) and then essential costs but based on educated guesswork. How much you are going to spend on food per month would be an example of an essential cost.
It’s also important to be strict with yourself about what are and what are not ‘essential’ costs. Whatever is left over after covering your essential costs what you are going to have left to pay for everything else.
Everyone is different, the important thing is to take full stock of your personal income and expenditure – being as honest as possible – and seeing if it leaves you with any money left over. If it does then it’s a case of making that remaining disposable income last (i.e. not overspending). However if after drawing up your budget you have more money going out than you have coming in then you only have two responsible alternatives: You can –
- Increase your income.
- Reduce your expenditure.
It can be difficult to track the small daily expenses (such as cups of coffee, sandwiches, car parking and so on) so here are a couple of tips to help.
1) Pay cash: Debit cards are very easy to use for even small purchases nowadays and you can spend money on them without ever really noticing the total impact on your bank balance. So take out a fixed lump sum of cash each week and commit to only using that cash for your ‘impulse’ spends on a day to day basis. You’ll realize how quickly you’re burning through your disposable income!
2) Cut back: Why pay for coffee when you’ve got a thermos flask or for sandwiches from a shop when you can take in a packed lunch? The simplest way to manage impulse spending is to stop it altogether or reduce it to an absolute minimum. Changing habits can be challenging but the savings can be rewarding.
I was thinking it would be a great time to take a look at comparing the amount you owe as well as how to create a healthy debt repayment arrangement. Obviously, this only works if you commit to spending less than what you earn. If you’re spending more than what you earn, this will cause pile up of debt – which eventually lead to a more serious financial problem.
To get you started, you need to write few items. Doing some tasks by hand adds personal touch and commitment and importance in what you want to do. You will also need to have all the latest statements of what you owe, from bills, credit card, and consumer loans. Analyze the interest rate on each.
You must make a chart with four columns consisting of each debt, amount you still owe, monthly payment, and the current interest rate on each debt. Make sure to get all the information from all the statements. The goal here is to have all your info in one spreadsheet.
Once you have the list and check which of the debts to be prioritized. Go through that list and number the debts based on their interest rate. Give the highest interest a big number 1 off to the left, the next highest a big 2, and so on. Don’t worry about which debt has the biggest balance – that doesn’t actually matter when figuring out which debt is the most important one to pay off.
Once you’re done with the order of debts in place, go to the debt marked with numbers. If it’s a credit card debt, call the credit card company and ask for a rate reduction, or transfer the balance to another card for a lower rate. You can also pay it off with a home equity line of credit or with a personal loan from your credit union. Consolidate your loans at a very low rate. The key is to lower that interest rate. Go through every one of your debts from highest to lowest interest rate and do your best to get each rate nice and low. Obviously, there are some rates you’re likely to be unable to easily change, like your mortgage rate, but see what you can do about most of the rest of them.
Over time, you should be eating away quickly at that top debt, and you’ll be able to eliminate it. Cross it off the list, then start hammering away at the new top dog on your list.
Whenever a debt adjusts in interest rate, cross it off the list, then add it back in just like a new debt where it belongs based on the new interest rate.
After you do this a few times, it’s useful to rewrite the list so that everything remains clear on it, but it’s fun to hold onto the old one (with some crossed-out debts) to remember where you came from.
If you are tired of lengthy family budgeting and want a quick fix in saving some funds, start on your basic needs – grocery. Your food budget is probably the highest budget-eater. On average, consumers spend more than 13 percent of their income on food. Fortunately, food bill is one of the most easily manipulated, and saving money is virtually effortless.
First, everyone’s heard that you should not shop when you’re hungry is a good idea. And you know the reason too well, right?
Here are some practical shopping ideas to keep in mind:
> Always shop with a list. On average, impulse buying accounts for 20 to 50 percent of a total grocery bill. Instead of wandering aimlessly through the aisles, bring a shopping list and a pen with you.
> Grocery stores are for groceries. Books, batteries, light bulbs and pet supplies can all be found at the grocery store. Before you purchase everything you need from one store, make sure you aren’t paying too much.
> Shop alone. Marketers spend a lot of money convincing kids to buy their cereal for a reason. By reducing your distractions, you can make thoughtful purchase decisions.
> Carefully consider the cost of convenience. As a general rule, the more convenient the item, the more it will cost. Ask yourself if it is really worth paying more for shredded cheese when shredding it yourself would take mere minutes and save you some cash.
> Shop only once per week. Try to adjust your schedule and your purchases so that you are going to the grocery store once a week. This will help reduce impulse shopping and should be a big cost saver. If you must go more than once per week, stick to your list.
> Plan your route. To find the most natural and least expensive ingredients, such as dairy, bread, vegetables, and fruit, try skipping the center of the store and make a loop of the outermost aisles.
> Consider generics. Look for generic brands of items where it really doesn’t make a difference. For example, most dry goods have the same ingredients, regardless of the brand. The difference in price, however, can be as much as a 50 percent discount.
> Use coupons wisely. Only use coupons for items you are planning to buy anyway. Also, make sure you compare the price of a product with the discount on the coupon to the regular price of the brand you normally buy.
Finally, don’t assume that all supermarkets have the same prices. Make a list of the ten or so products you buy the most and do some comparison shopping. Often you will find a huge difference between chains, and if you can save just 5 percent it will add up to hundreds of dollars in the long run.
If you are neck-deep buried by debt, one of the best things to do is organize your finances first; to determine exactly how much you owe and to whom. You can do the conventional way or you can download Apps to organize your finances.
The simplest and slowest way is to take each individual bills and find the balance due as well as the lender’s name. You should keep track of this information going forward, using a spreadsheet, an online service, or a personal finance computer program. While some programs can pull balance information directly from your lenders, if you are using a spreadsheet or notebook, you’ll need to do it manually. Consider signing up for online access for each of your lenders so that you can check your balance and payment information easily and frequently.
If you aren’t entirely sure that you are receiving all of your bills (especially if you’ve moved around quite a bit or have recently divorced), then it’s a good idea to pull free annual copies of each of your credit reports to find out what your lenders are reporting to each of the credit agencies. To get a full picture of how much debt you owe, you really should get reports from each of the three major credit reporting agencies, Equifax, TransUnion, and Experian, because different information may be contained on each of the reports.
Keep in mind that the information contained in the credit reports may not be the absolute latest, due to the lag in reporting. Therefore, once you obtain the credit reports, you should also contact each lender to find out what the current amount owed is. Then, sign up for online access to each of these accounts to accurately track payment amounts and balances.
The organization is essential to keeping your financial obligations up to date, so taking some time up front to set up access and find out balance and payment amounts will definitely save you some time later, and help prevent late fees.
Becoming a couple changes your financial situation. Whether you are in a serious relationship, newlyweds, or tied the knot years ago, there is an undeniable stress that comes from mixing love and personal finance.
If you are getting married, you and your future spouse are ready to embrace all of each other’s outstanding qualities and unconditionally accept any less-than-ideal traits. However, before you walk down the aisle and commit to spending the rest of your lives together, you need to discuss how you will be spending your money as husband and wife.
Avoid financial problems and start making plans for your future together. Find the resources you need to stay committed to successful financial planning together. Money does matter when it comes to having a happy, healthy relationship so couples should try to devote time to improving their financial standing. A little honest communication could keep your relationship from becoming a statistic.
When you and your partner are busy balancing everything in your lives, sometimes financial planning can fall to the wayside. Following are 10 quick tips about financial planning together for when life gets hectic.
1. Set priorities and specific goals. Don’t assume you both have the same goals without discussing them.
2. Discuss values. Sometimes differing values make agreement on goals difficult. When one person wants to spend now and one wants to save for later, it can be a source of friction. The same is true when one spouse tends to be less risk oriented than the other about investments.
3. Plan in five year units. When planning for five year blocks, you can set both intermediate and long-range goals without feeling you’re being deprived forever.
4. Budget together. Set up a manageable system for your cash flow together.
5. Know where your money is going. Keep records of your spending.
6. Don’t assume that because you’re both working that you have a lot more to spend.
7. Save regularly so you aren’t locked into that second income.
8. Who handles the actual paperwork can be a matter of personal preference, although both of you should practice at it.
9. Don’t confuse the task of doing paperwork with the act of financial decision making.
10. Sit down together and discuss finances at least once a month. We all know that communication is crucial in developing a healthy financial relationship, yet it’s sometimes hard to know where to start. Since taking the time to talk is a great.
Finally, the most important money move you might make for your relationship is to embrace your differences. Understand that you cannot change feelings created by a lifetime of experience; instead, try to cultivate the positive aspects of each of your styles. There is no one “right” way to handle your finances and a marriage of your money styles may be the perfect solution.