When you hear the words “personal finance,” do you wince? Are you frustrated by your income, waiting for your paycheck to come before you can pay bills? Personal finance doesn’t need to be like this. A few simple changes to the way you think about money and the way you spend can allow you to take ownership of your finances and put you in the driver’s seat with your money goals.
The first step to taking control of your finances is thinking critically and realistically about your income. Bust open the books and make a ledger of your income compared to your expenses. Break your expenses down into a few categories. There’s spending you have to cover, like your utilities and car payment, and then there’s spending you’d like to do, like leisure activities and your hobbies.
The best thing about a budget is that it puts your finances into black-and-white figures you can easily think about. Then, you can see how much of your discretionary spending (the money you’d like to spend) is going toward things that have nothing to do with your money goals.
Once you have the information from your budget, you can give every dollar in your paycheck a job. Before you even get your check, you need to know where every dollar is going. Some of your money will be earmarked for your utilities and your bills. Think about ways to lower your bills, too. Can you use less electricity, less water, or fewer household items? Maybe your car payment is too high, or your rent or mortgage is out of step with your income.
Make the changes you need to make to get these manageable. If you need to sell that nice car and switch to something more responsible to get your bills under control, then you should make that change. If your apartment is far too pricey for your budget, bite the bullet and move somewhere more affordable.
Of course, the easiest place to cut spending is with your “fun money.” Try to set back twenty percent of your income to invest what you save by making these changes. Investing your money into responsible financial products is a great way to get your money working for you.
From there, you can start pushing toward your money goals with a better understanding of your personal finances. Before you know it, you’ll have a sizable amount of savings set back for a rainy day!