If you are reading this post, it means you wish to bring in a change in your financial stability. And that is the first thing you need, the urge to bring in the change, and next, the discipline to have good financial habits. Every other person we meet daily is either suffering from debt or other financial issues. Each of us is striving hard to bring in the much-required change for a better financial life.
The question that arises now is why some of us fail to do so? Even before we start planning for a secure financial future, we must fix things in the present. Let’s see how we can take hold of our present to build a stable financial future.
1. Understand your spending ability
There is an old proverb which says “Cut your coat according to your cloth”. This means you should understand your affordability and spend accordingly. People spending more than their income will fall into trouble resulting in financial problems. Income and expenditure should have a harmonious proportion.
If my income structure makes up for my monthly expenditure and I am left with only a few hundred dollars, I would save them rather than spend them at a restaurant or pub.
2. Formulate a budget
When we have sorted out our spending ability, now is the time to create a budget. List all your bills, which would include transportation, groceries, credit card bills, utility bills, transportation, rent, etc. Check the amount of money required to pay these bills and subtract it from your monthly income to figure out if you are spending more than your income. If you are spending more, then it is alarming because you might be in debt shortly. However, if your spending does not exceed your income, it’s good news. Use the remaining money to invest or categorize them for the next month to reduce the burden.
3. Keep an eye on your expenditure
After budgeting is done, we get a clear picture of where we stand. Whether or not our expenditure crosses our income limit, we now need to slash our expenditure wherever we can. Let’s see a few examples:
i) Regulate utility bills
On average, households spend around $2000 on utility bills, most of which results from heating and cooling. You need to find out ways to slash utility bills. Usage of CFL or LED bulbs can help a lot in this regards. Also, when you are not using any heating or cooling devices, unplug all of them. Furthermore, you can install a programmable thermostat to reduce heating and cooling when your house is empty.
ii) Cut down on transportation costs
A personal conveyance does add a lot to your expenditure, be it gas or maintenance. Try to travel using public transport or ride-sharing services like Uber. But in the unlikely event of being unable to do it, ride your car by carpooling. That definitely would make up the expenditure on personal conveyance.
iii) Cook meals at home
A lot of money is drained out with our habit of having takeaway dinners. Try cooking meals at home and pack the left-over for lunch the next day. Not only will it help you save money, but also keep you healthy and fit. There is nothing better than food cooked at home.
4. Eliminate bad debts
Not all debts are the same. A loan that you have taken out, which has high-interest rate, is bad. It’s not only ugly for your finances but also bad for your mental health as you end up thinking all day long about the ways to pay it off. Try to wave off bad debts, as soon as you can, to gain financial independence.
5. Give up bad habits
As I said earlier, discipline is very important if you want to achieve a goal. Habits like having a cup of coffee at a coffee shop, opting for a Netflix subscription, or rather subscribing for newspapers/magazines adds a lot to your expenditure. You can easily make a cup of coffee at home, borrow movies from a library, and keep track of news online. Try to find out other bad habits that you have, which drain out your hard-earned money.
The one who plans and sticks to it succeeds. A plan helps to set goals and eventually manage finances in the best way. Write your plan in a piece of paper and keep it at your workstation or somewhere you can see it daily. Your plan must also include ways to fight debt and manage other expenses. If you strive to carry out your plan wholeheartedly, very soon, you will be able to take control of your financial life, which in the long run would provide you with financial independence.
Following these simple and efficient ways will help you bring stability in your finances as well as in your life. Proper financial strength brings in happiness and prosperity in life. And, always remember managing finances might seem troublesome, but it’s not something that we cannot do.