Money can cause a lot of problems whether you have a little or a lot, and one of the reasons for those problems is not knowing how to manage it. It’s not uncommon for people to reach adulthood without being taught much or anything about personal finances, but it’s never too late to learn. There are books, articles, blogs, podcasts and more than can make you as financially savvy as you’d like to be, but the short guide below can help you with some of the basics.
What is a Budget?
You have a certain amount of money coming in and a certain amount going out. Making a budget means making sure that the latter amount is smaller than the former. If it isn’t, you need to spend less or make more. However, first you need to know where your money is going. One of the easiest ways to do this is with an app, but if you prefer, you can simply write down everything that you spend for a few months. Be sure to include everything, even if it’s just a cup of coffee. You might be surprised at how small things add up. Then, take a look at what you’ve learned. Apps can also help you allocate a certain amount of money in various categories. Be sure to include things that you might not pay for regularly but need from time to time, such as a haircut or trips the dry cleaners.
How Can I Spend Less?
Tracking your spending usually brings a revelation about how much you were spending without realizing it. However, there may also be room for improvement in less obvious places. For example, you might want to consider moving to a smaller apartment or trading your vehicle in for a cheaper model. If you are paying off debt, there might be a way to lower your payments. A student loan refinance calculator can help you determine what you would pay if you refinanced your loans with a private lender. Lower interest rates can mean lower monthly payments and saving money overall on the debt. Another tip is to stop using your credit card since the interest rates are high, and see if you can roll your balance onto a lower-interest card.
What Should I Save For?
The first thing you need to be saving for is an emergency fund. Having anywhere from three to nine months or more of expenses can mean that the kind of incidents that often plunge people into debt and even bankruptcy, like job loss or a medical emergency, can be weathered. Next, you should be saving for retirement. You may think that you are too young to worry about this, but this is precisely why you should save. The money you put away now will appreciate significantly in value. If you are older, it’s still never too late to start saving. Finally, you may have your own idea about things you want to save for, such as a home, a trip or your child’s education. Having money automatically deducted from your paycheck for savings is a great way to make this as painless as possible.