It’s never too late to learn to take control of your money. Take these tips into account and be sure that you will improve your finances.
It would be great to learn how to manage money from a young age, for those who did not have that joy there are other alternatives. Some have luckily had mentors at some point in their lives, for others it has not been so easy and perhaps the “trial and error” method has not been enough to achieve healthy finances. But all is not lost, at any point along the way it is possible to apply certain habits that will undoubtedly improve the outlook.
1. Educate yourself financially
The first step to having a healthy relationship with money is to educate yourself. It is not about getting a PhD in finance, but about acquiring at least basic notions in the area. Knowing the tools and techniques to manage your personal finances will lay the foundation to gain financial security. This type of preparation will help you act more assertively in terms of money management and thus make better decisions.
In this sense, you can get the necessary information in specialized books or even take courses in online academies such as Crehana, for example. It is also possible to find useful tips on the web and social networks, just make sure they are reliable sources.
2. Work out your budget
Although this recommendation sounds more than repeated, it is essential when it comes to organizing finances. Controlling the flow of money begins by specifying what your expenses are and organizing them in order of priority. It is also important to keep an eye on those variable expenses that in some cases you will notice are unnecessary.
The idea is to make sure that your minimum income covers the fixed expenses, it is also convenient to take note of other cash inflows from month to month. The latter will allow you to determine in which periods of the year or particular situations you may have surpluses. Make your own model of cash inflows and outflows in Excel or you can download applications such as Finerio, Registro Contable or Money Manager.
3. Get out of debt
The dream situation would be to have no debts, but it is not always possible to pay cash. Having long-term, high-interest commitments can be a real headache. If you need financing, try to minimize the number of installments and compare several options in different institutions to choose the one that offers the lowest interest rate.
As for credit cards, there are a couple of popular techniques for paying them off. One of them is the “avalanche method” which consists of amortizing the debt with the highest interest rate, after having made the minimum payments on the rest. Its advantage is that the interest will not eat up your money.
On the other hand, there is the “snowball” methodology that focuses on paying off the smallest debt. Although the larger commitments will continue to generate high interest, it can be comforting and stimulating to close the easier ones.
4. Save and invest
Some experts recommend setting aside 10% of income for savings, others talk about creating an emergency fund. In fact, the ideal is to have a “cushion” equivalent to your income for three to six months, in a savings account that provides at least 1.5% interest return.
After reaching this goal, you can choose to make investments. Currently, one alternative is to invest in cryptocurrencies or in the stock market. In any case, take into account that these are high risk transactions, be well-informed and do not compromise money that you have destined for other purposes.
In general, these are the main tips you should start applying to improve your finances. However, here are some other small but important tips that will help you stay on the road to financial freedom:
- Set financial goals.
- Avoid using credit cards.
- Set limits to variable expenses.
- Shop around before you buy.
- Join subscription and rewards programs.
- Buy secondhand items.
- Watch out for small expenses.
- Avoid unnecessary purchases.
- Automate bill payments.
Finally, the wisest financial advice that can be given is “don’t spend more than you earn”. However, every recommendation is welcome when it comes to taking actions to achieve the cherished financial freedom. So if you want to contribute to this topic, make your comments on our social networks.