One of life’s most stressful concerns learn about a free invoice template for many people is their finances. Millions of people live the paycheck-to-paycheck cycle with no idea how to break out of it and get ahead.
If that sounds like you, rest assured, it’s a perfectly normal situation to be in. Just because it’s normal doesn’t mean it’s where you want to be, though. The fact that you’re trying to learn how to break the cycle and gain control of your finances is the first step to success!
Now that you’re ready to master your money and stop worrying about finances, you can use these five tips to meet your goals.
1. Take a Good Look at Your Money
Are you one of the many of us who know you’re making a decent income but aren’t quite sure where your money is going? It’s time to take a serious look at your cash flow.
You don’t have to be a shopaholic to be wasting money. It could be something as basic as a credit card with a too-high interest rate or automatic withdrawals you forgot about.
Before you try to allocate your money to getting ahead, sit down with your last three bank statements and some highlighters. Go through each month and highlight every purchase on your statement, separating by color categories like:
- Mortgage/utilities/car payment
- Gas and groceries
- Phone and internet
- Credit cards/loans
- Entertainment (including restaurants, TV service subscriptions, and anything otherwise “unnecessary”)
- Clothing/school expenses
- Health expenses
If your entertainment purchases are higher in one area than another, such as dining out, break that category down even further. Get a clear picture of where your money is going before you try to fix any other problems.
2. Educate Yourself on Your Situation
No one has to deal with their finances alone anymore. A decade ago this might not have been the case, and you may have struggled with finding role models or mentors to give you economic advice.
But today, there are so many communities on the internet of people just like you who can help you gain control of your money.
While social media can be a great asset, it can also be dangerous if you’re not careful who you are following. People who live above their means or look like they have it all can cause you to feel dissatisfied with your own lot in life.
Instead, join groups and follow people who have been in your situation or are there now. See how they are handling their money and ask for advice from those who have successfully navigated out of the paycheck-to-paycheck cycle.
3. Juggle Your Debt
When it always feels like you spent your paycheck before it hit your bank, the juggling act of robbing from Peter to pay Paul is exhausting. It’s time to reassess your bills and learn a new juggling act.
Check your due dates and interest rates. Are there any bills you are always late on because you’re trying to pay others at that time? Make a list of when each bill is due, and if there are any you can pay earlier, try that. Some companies are more flexible about letting you choose your due date. It’s worth a call!
While you’re at it, check out your credit score. If it has gone up a little since you took out a loan or credit card, you might want to look into refinancing high interest rates.
But if that mountain of bills is starting to get intimidating and you’re making the bare minimum payments on your loans, another option could be debt consolidation.
4. Learn the Art of Budgeting
Once you have a clear picture of where your money is going, you can sit down and design a budget. Budgeting is a skill that takes time to learn and incorporate. Don’t be hard on yourself if you don’t follow your plan perfectly at first.
As you create your budget, break down your income (credit) paycheck to paycheck. Under each credit, list the bills (debits) that would be due during that cycle.
If you find your debits exceed your credits, look at the due dates again. Are there any bills that can be moved without penalties to another week when you have more credit than debit?
The goal is to keep juggling these until anything with an interest rate is being paid well before the due date. This puts more towards your principal, paying off the debt faster.
5. Follow the 24-Hour Rule
Impulse spending gets a lot of people in financial binds. You can curb this problem by implementing the 24-hour rule for anything that is not urgent.
This rule simply says, if you think you want something, wait 24 hours before you buy it. You can add it to the cart online, but don’t press purchase until you’ve thought about it for an entire day and night.
The same theory applies to non-urgent groceries. If you can wait 24 hours to buy them, you have time to look for coupons or sales in another store.
If you really want it after 24 hours, and you can afford it, get it, but be prepared to adjust your budget!
The two most important categories in life for you to take control of are your health and your finances. Economic stress takes a toll on your physical and mental wellness, and the opposite applies, too.
Everything beyond your health and finances is affected by both of these matters. When you’re ready to reduce your stress in each part of your life, start with your finances. The rest will fall into place.