Published by Programme B
Money may not buy you happiness, but it’ll give you the financial stability to find whatever does make you happy. Making sound decisions with your finances is important if you want to stay out of debt and have the freedom to do the things you really want to do. It can sometimes seem like an insurmountable task, but it’s possible to achieve if you’re careful about how and when you spend your money. Here are some tips to help you make smart financial decisions in your everyday life.
Set Financial Goals
Making good decisions with your money starts with setting financial goals for yourself. Figure out what you ultimately want to work toward, whether it’s reducing your debt, being able to afford a new car or home, or having enough savings to retire comfortably. You should set short-term goals as well, such as saving for new furniture or being able to pay for your child’s braces. Every time you reach one of your short-term goals, you’ll become more confident that you can also achieve your long-term objectives. Knowing what awaits you at the finish line can make it easier to cut back on your spending right now since you’ll have a clear goal in mind that’s worth resisting the temptation to splurge on every little thing you might want.
Create a Budget
A key part of making good financial decisions is knowing exactly how much money you’re bringing in, how much you’re spending, and where it’s all going. Determine what costs are essential and those that are unnecessary. If you tend to spend a lot on dining out or constantly upgrading your devices, you can cut back on those things and allocate the money elsewhere, like your savings account, for example. It’s a good idea to budget for emergency situations, so you would have liquid cash available if something unexpected occurs. This way, you won’t need to dip into your savings, and can instead use that extra money to pay off repair or medical bills.
Put Money in a Savings Account
Instead of leaving your money in a checking account, move it to a savings account. This is a great financial resource whether you live in Canada, the US, or anywhere else in the world. As long as it remains untouched, your savings account will continue to accrue interest. If possible, place your money in a high-interest account to get the most out of your savings. These may not be available to you if you have a poor credit score or bad credit history, but you can always rehabilitate those. Once you do, open up a new savings account with better yields, and move your money into it as soon as you can.
Pay Off Your Credit Card Balance
One of the simplest ways to improve your credit history and score is by paying off your credit card balance on time every month. Not only will this ensure that you aren’t spending more than you can afford, but it will also help you avoid the slippery slope of falling into debt. Every month that you don’t pay it off, your balance starts accruing interest, so you’ll end up owing even more money in the long run. If you need to put large purchases on your credit card, try to keep it below 30% of your total available credit. This will allow you enough breathing room to pay the balance off over a longer period of time without incurring too much interest.
Don’t Make Rash Spending Decisions
When you need to spend money on something for your home, your family, or yourself, you might be tempted to buy it immediately. It can be hard to take time to consider your options carefully, especially when it’s something that needs to be immediately replaced, like a busted water heater or a broken air conditioner. However, this can result in unnecessary expenses. Do your homework and compare the prices of different options before making a purchase. That way, you will make sure you’re getting the best deal possible so your savings won’t take too much of a hit. If you can suffer through a few extra days while you do your research, you can keep the costs to a minimum and avoid falling behind on your financial goals.
Proper money management is all about personal financial responsibility. Keep track of every dollar you earn and each purchase you make, exercise self-control to avoid unnecessary spending and do everything you can to reduce your debt. Your long-term goals are worth the sacrifice of not splurging on unnecessary things for instant gratification. If you follow these tips before making any financial decisions, you’ll be on your way to having the freedom to live the life you want.