When it comes to managing your finances, it can feel overwhelming if you’re not in control of each dollar that you earn. You may experience stress and avoid tracking your spending, which can make it easy to lose money and get into debt. If you want to learn how to control your finances this year and have more peace of mind, there are a few different steps to take.
Create A Budget –
Creating a budget is the first step you need to take to know where your money is going and how much you have left over each month. Calculate your household income and how much you earn after taxes each month. Write down each expense you have, including everything from your rent or mortgage to your student loans. You’ll need to enter the numbers each day when you spend money on food at the grocery store or fill up on gas to determine how much you have left to spend until your next paycheck.
Reduce Your Spending –
Cutting out unnecessary expenses from your budget is crucial to ensure you have more money to save or put towards debt as you work on taking control of your finances. Cancel your cable or magazine subscriptions and avoid making any more trips to the nail salon. If you have more flexibility in your budget, determine how much you want to spend on luxuries if you don’t have a lot of debt.
Pay Off Debts –
Paying off debt is one of the main steps to take to financial freedom to ensure you don’t owe any money to lenders. Start by writing down the balance on each credit card you own, as well as any car loans or student debt you may owe. You can choose to pay off the lowest balances first, which can provide you with the motivation to continue repaying all the debt and gaining momentum. You can also pay off the cards with the highest interest rates (regardless of balance), which will help you save more money in the end. Both methods have been proven to work. Paying off your debt can alleviate the burden and allow you to save more on interest over time.
If you’re unsure of how to approach your debt, consider contacting a non-profit credit counseling agency for assistance. A credit counseling agency can help you create a Debt Management Program to determine when you can become debt-free. The DMP is specific to the amount of money you owe and will provide you with a guide for the coming months or years ahead. The agency can also provide you with free credit counseling to make sure you don’t fail into the debt trap ever again. They can help you get your finances back on the right track.
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Use Cash More –
Although it may feel more convenient to use a debit or credit card when making purchases, studies show it causes many people to spend more money because they don’t physically see the money in their hands. Get in the habit of using cash to ensure you’re more aware of what each purchase is really costing you. You can also cut up your credit cards to avoid the temptation to use them on unnecessary purchases or splurges.
Save Emergency Funds –
Saving at least $2,000-$3,000 for an emergency fund is key to having money when your car needs unexpected repairs, or you have to pay for a minor repair on your home. The money can prevent you from using your credit card and getting into debt. Once you use any of the money, it’s important to work hard to get it back to that $2,000-$3,000 range.
Conclusion –
Knowing how to take control of your finances is the best way to increase your net worth and avoid stress when it comes to spending, saving, or budgeting. You can feel like you’re in control of your money and have peace of mind understanding what purchases you can afford to make while working towards your overall financial goals for 2023. Reach out to AdvantageCCS today and ask us about our free credit counseling services and our expert Debt Management Program.
