We’ve all been there. You get your paycheck and think, I really have to start getting my finances in order, but then you spend the whole paycheck on some shoes or take your friends out to lunch and forget about the whole thing until next payday rolls around.
And then the cycle repeats itself again. The problem isn’t that you don’t want to put your finances in order; it’s that it seems like such an overwhelming task that you can never get started and find yourself putting it off until it gets worse and worse.
Get your finances in order with these helpful tips from Sohanjit!
Step 1: Look at the numbers
It’s always a good idea to get a handle on where you’re at financially
There are tools out there that can help and it doesn’t take long to input the information. This can be a great way to find any major red flags in your spending habits and look for areas that you can tweak.
You may find things that can help put more money in your pocket or point out steps you could take towards being more financially independent. Be mindful of all this when setting budgets, too, so you don’t forget anything important.
Don’t overspend
Just because something is on sale doesn’t mean it’s a good deal if you can only afford one thing after buying it. Resist impulse buys as well as urges to buy everything that looks like a bargain.
Step 2: Create a budget
Creating a budget helps you understand the flow of money that is coming into and going out of your bank account. The following questions will help you create a budget:
What is the source of income (job, gifts, investments)?
Do I spend more or less than my monthly income?
If I do spend more than my monthly income, what are my resources to make up for this difference?
What should I be saving for?
How much am I spending on housing?
How much am I spending on transportation?
How much am I spending on food?
Step 3: Start saving
Start small.
Whether you’re just putting a few dollars into a jar each week or transferring larger amounts of money to a savings account, it all counts and adds up. Even if you can’t afford to save very much each month, even being able to save something is better than nothing.
Save for the short-term, medium-term, and long-term. Different types of savings should be put away for different periods of time because sometimes we don’t know what the future may hold.
For example, those who are saving for retirement might want to invest their money in stocks that pay dividends that will be paid out on a regular basis.
In contrast, when saving for an emergency fund, people might want to stick with low-risk investments like CDs. A good rule of thumb is to have three months’ worth of expenses saved up in case anything happens.
Step 4: Analyze spending
The easiest way to figure out where you’re spending money is to look at your receipts. Often times, just by looking at them, you’ll be able to see patterns.
For example, perhaps on the weekends, you always buy coffee drinks and donuts. Or maybe when you eat out it’s mostly fast food and pizza joints. If this is the case, create a budget that includes only those expenses instead of all of them. That way, you can allocate more money towards necessities during the week.
This exercise also helps me figure out what areas I need to cut back in so I’m not depriving myself unnecessarily. For instance, if I realized that my grocery bill was too high for my current income level (which often happens), then I would make adjustments accordingly.
Step 5: Make saving automatic
If you have an automatic savings plan in place, you are far more likely to not spend frivolously. At the end of each month, when I am paid and know what my expenses will be for the next month, I automatically set aside some money into a savings account.
Start by setting aside a small amount like $10-20 that is easy to commit to – don’t over commit and leave no room for fun purchases.
Once you see how easy it is to save, add another $5 or so every month until you reach your desired saving goal. Saving doesn’t need to be boring and difficult, just make it part of your monthly routine!
Step 6: Use apps to help you reach goals
Find budgeting apps to help you track your spending and manage your budget. Save more money by using an app that rewards you for completing tasks, like tracking expenses or watching a video about financial basics.
Start investing for the future and open a savings account or make small monthly contributions to an investment portfolio.
Consider allocating some of the money you plan to spend on shopping this holiday season as savings instead. You might think it’s too early to start saving for next year, but it’s never too early.
You can start now and see those funds grow over time. If there are goals you want to achieve financially, set up a plan today so you know what needs to be done step-by-step tomorrow, next week, next month and next year.