What do you want your money to do for you? Would you like to dig your way out of debt? Do you wish you could save more money each month? Would you like to have more to spend on the things that are most important to you? If so, you need to take a good look at your goal setting, credit, saving, and spending habits. You can’t have everything, but you can live with less worry and make the most of your money by setting goals, handling credit responsibly, saving for the future, and spending wisely. Take charge of your finances by taking these steps:
- Set spending and saving goals. You will get more out of life if you know what you want. Avoid trying to have everything! Instead, set goals and priorities that are right for you then work to reach them. Make your goals specific, measurable, action-oriented, and realistic. Set deadlines for reaching your goals. This isn’t about instant gratification; it’s about reaching your goals!
- Check your credit score. This will give you an idea how a potential creditor sees you. A high credit score indicates that you have stable employment, use credit responsibly, and pay your bills on time. A low credit score may show that you change jobs often, have more debt than advisable at your income level, fail to pay your bills on time, or have defaulted on debts. The lower your credit score, the greater the risk a creditor takes when lending you money. A low credit score can make it difficult to buy a car or a house, to reach other important goals, or to handle emergencies.
- Avoid running up credit card debt. Make it your goal to pay credit card bills in full each month. If you must pay for a big-ticket item over time, make a down payment and the largest (not the smallest) payments you can afford. People who use credit cards can easily create $5,000 in debt annually. If you make only the minimum payment each month, it will take years to pay off the debt and cost hundreds of dollars in interest! Before you buy something on credit, find out the annual percentage rate (APR) of interest, how much total interest you will pay over time, and the total cost.
- Make saving a priority. Start with an emergency and opportunity fund equal to two to six times your monthly take-home pay. Open a retirement account and add to it each month. If your employer matches up to a certain amount, invest at least enough to qualify for the match. The earlier you start saving for retirement, the less you will have to save and the more you will have to live on when you retire. (You will reach retirement age a lot sooner than you think!) Save for big-ticket items like a vacation, a car, buying a house, or children’s college expenses. Delay purchases while you save for a larger down payment to keep your debt as low as possible. You will enjoy life more if you are not constantly worrying about debt!
- Make a budget and use it as a tool to reach your goals. Many people view a budget as something that dictates how to spend every penny—something that takes all the fun out of life. Instead, a budget helps you think through your needs, wants, goals and priorities so that you get more of what you want out of life. If an emergency or opportunity arises, you know you can handle it. On the other hand, temptations have less power to derail you because you have clearly identified your goals and priorities.
- Avoid overspending by shopping less. Each time you stop at the grocery store during the week, you are likely to pick up a few extra items. If you head to the mall to pass time, you are likely to come home with something you didn’t plan to buy. Do you often buy items you don’t really need? Do you have more stuff than space? If so, see how long you can go without going shopping or even searching the web? Take a walk, read a book, or visit a friend instead. You may find that you don’t really miss shopping (or all the extra stuff) all that much.
- Take a look at your expensive habits. How much could you save each month if you gave up your bad habits (cigarettes, beer, shoes, frequent nights out)? How often do you get your nails manicured or your hair cut or colored ? How much would you save if you did your own nails, went a week longer between haircuts, or touched up your roots at home? How much would you save each week? Each month? In a year?
- Try to cut what you spend on food. Could you cut or eliminate costly practices such as morning coffee stops, eating lunch out or frequent visits to snack and beverage machines? You could save $10 a day simply by taking a brown bag lunch to work. How many other meals do you eat out each week?
You don’t have to give up eating out entirely. Start by reducing the times you eat out each week. Consider eating at a less expensive restaurant. Try planning your order before you leave home. Ask for water instead of ordering pricy beverages. Skip appetizers and desserts. Select from moderately priced menu options. If you can’t eat it all, ask for a take-home box and enjoy the leftovers for lunch tomorrow.
Plan nutritious, home-cooked meals for the week and make a list of the ingredients you will need before shopping for groceries. At the grocery store, try to stick to your list unless you can swap an item for a similar one that costs less. There are plenty of tasty, easy-to-prepare choices that won’t break the bank. Avoid wasting the food you buy by keeping tabs on items that needs using soon and by making use of leftovers.
Review your goals, your budget, and your progress in managing your finances each month. Your plans won’t always work out perfectly, but with continuing effort you can learn to get more for your money, cut your reliance on credit, and increase your savings. In the process, you will gain confidence in your ability to handle your finances responsibly.
Can you think of other ways to improve your finances?