According to a survey conducted by NFCC, 58% of Americans don’t have a budget and don’t know how much they spend each month. Most people say they’re too busy or simply don’t care.
Living paycheck to paycheck is not a healthy way to live life. It can cause you a lot of anxiety, stress, and even ruin your personal relationships such as your marriage and friendships.
Managing your money correctly can help you live debt-free and build your path to financial freedom, where you can live off of your savings/investments, not depending on work, even before retirement.
1) Pay Yourself First
This tip was taken out of the book “The Richest Man in Babylon,” and can also be found in the bestseller Rich Dad Poor Dad.
Most of us, after we receive our paychecks pay our expenses first (rent, food, utilities, etc.), and then we start thinking about saving what’s left. The problem is that we end up saving less money than we should or none at all.
The “Pay Yourself First” method says we should do the reverse, and separate an amount that goes into our savings – at least 10% – and then pay our bills.
2) Track Your Expenses
If you want to manage your money well and stop worrying about debt, you must control your expenses. Do you know how much money you earn and how much you spend each week?
It may seem like a daunting task at first, but it really isn’t. There are many free tools available to help you with that.
The best one is the app Mint, and it will help you with your budget, bills, and credit monitoring.
3) Cook At Home Frequently
Cooking at home is not only good for your health – since you’ll often make better dietary decisions, but it’s also good for your budget. It can cost you as little as $20 per week.
You can prepare everything ahead of time and put the food in the freezer in containers, this way you’ll be less tempted to order delivery.
4) Have an Emergency Fund
As adults, we’re constantly worried about having enough money to pay all of our bills on time.
Unfortunately, we come across financial surprises like repairs, medical emergencies, and even job loss. We have to be prepared for those situations, and we can do that with an emergency fund.
An emergency fund consists of at least three months of your monthly expenses in a safe investment with high liquidity.
5) Live Below Your Means
If you want to pay your debt off and live a less stressful life, you should do your best to live below your means.
This means not spending more than you earn. It’s perfectly possible to live a frugal life without feeling deprived.
6) Plan Your Purchases
As humans, we tend to want immediacy, but that behavior can get us in a huge pile of debt.
Do you want to travel overseas, take a cruise, buy a home or a car? Having financial goals can also keep you more disciplined.
Therefore, it’s crucial to plan how much money and time you need to save for your purchases.
7) Make Substitutions
After you become aware of where you spend your money, start looking for things you can substitute for free or cheaper. Do you pay for a gym membership but never even go? Or maybe your phone bill is too expensive and you could maybe reduce it?
Start looking for ways you can cut costs without disrupting your daily life.