Managing Your Finances Made Easy With These Useful Tips

Managing your finances is a radical act of self-care.

Just like tending to your health, the things in your personal space, and your relationships, giving time and attention to your finances is essential if you want to have a life where you’re free to be who you feel you’re called to be. With that in mind, the following will explore a few quintessential steps involved in managing your finances.

Income Awareness

To begin with, you’re going to want to become aware of your income. If you have the kind of job that pays you the same amount every two weeks, then this step will be easy. But more and more people are running their own businesses, managing multiple smaller incomes, working in an industry where tips or commission impact their wages or working gig-based jobs, and this means that, quite often, people don’t know what they’re making.

If your income is inconsistent, take the time to calculate your average monthly income as well as take note of what your lowest earning for a given month was. Develop a sense of what a normal month is for you, what a below-average month is for you, and what a great month is for you.

Spending Awareness

You’re also going to want to get aware of your spending. This might take a month or longer to fully grasp. Start tracking your spending; you don’t need to make changes to it initially (although, often, people find that tracking their spending does stop them from making certain purchases because they don’t want to write down that they bought a pack of gum four times in a given week).

Figure out what percentage of your income you’re spending and sit with that and decide whether it feels ideal or not. Take note of patterns that arise. Maybe when you’re stressed or tired, you spend more than you do when you’re rested. Maybe when you grocery shop after work on Fridays, you spend more than if you go in on Saturday morning. Look for areas where you can trim your expenses without feeling like you’re sacrificing something.

Debt Awareness

It’s not uncommon to have debt. In 2021, the average American was $90,460 in debt. It’s common to have student loans, mortgages, credit cards, and personal loans. This being said, just because something is common doesn’t mean it’s ideal or comfortable. Take stock of the debt you have and develop a plan to pay it off within a reasonable amount of time. A debt snowball method is a highly-effective approach to dealing with multiple different debts. Being aware of your debt, monthly payments, and the amount of interest added to your debt each month can make it easier to avoid taking on more debt in the future. It’s easy to throw twenty bucks here and fifty bucks there onto your credit card, but when you realize how much interest is costing you, it becomes much simpler to wait until you can pay for the purchase in cash. After this step, you should have a clear understanding of the debt you have, and how long it’s going to take to pay it off (again, it’s great to have a good, better, and best timeline).

Savings Awareness

You also want to have an awareness of how much you’re saving and how much you ideally want to be saving. The financially educated folk at Boston financial planning emphasize that this should include the money you’re saving up for big purchases, emergencies, retirement, and what you intend on leaving for future generations of your family. Learning about different ways to store or invest your savings can be part of this step. You also likely want to speak to a professional about how much you’re going to realistically need for retirement. People are living longer than ever, and economies all around the world are in flux. Make sure that you understand what retirement is really going to cost.

Build an Emergency Fund

One of the most important elements of taking control of your finances is to build an emergency fund. This should be your number one financial goal, even before paying off debts (still make your minimum payments, of course), because life is wacky and unpredictable, and you don’t want something like a chipped tooth or a car accident leaving you in financial ruin. Start by saving up $1000 just for emergencies. Once that step is done, you can choose your next financial goal to focus on. Ideally, you want to have three months’ worth of expenses in your emergency fund if you have a consistent job and six months’ worth if you have a job that varies in income or bookings.

The above information should open you up to the beauty and freedom that can come with managing your finances. Making small, consistent steps in the right direction is the only way to begin making permanent changes to your financial situation. All people deserve to live without the burden of financial stress; make sure you’re doing everything you can to give yourself the gift of peace.