Being financially responsible is important. After all, you want to be able to keep a roof over your head and food in your fridge, and you want to be able to enjoy some activities and thrills every now and then.
Unfortunately, too many people in the world are bad with money. Maybe they don’t pay their bills on time (or at all), maybe the rack up credit card debt, or maybe they just end up spending more than what they have.
If you’re bad with money or want to simply change your financial habits, use the following five tips to get in control of your finances.
1. Create a budget.
In order to become financially responsible, you need to create a budget. This requires you to go through your finances with a magnifying glass and determine exactly how much you bring in every month and how much you spend. Then, you need to find the items you can cut back on and create a budget.
Try to make a budget for everything, not just your obvious bills. Make a budget for groceries, gas, dining out, clothes shopping and other expenses. Do your best not to go over your allotted amount every month, and every month, try to cut back just a little bit more. This will help you get in control of your money more responsibly.
2. Start a savings account.
Did you know that there are people out there who have one year’s worth of income in their savings account? These people are good with money and prepared for any inconveniences that may happen in their future.
Now, nobody expects you to end up with that type of savings account (unless you want to), but it is important that you have one. Accidents and incidentals happen, and it’s important that you’re prepared for these occurrences financially. One great way to start a savings account is to have a certain percentage of your paychecks deposited directly into your savings account. You should also consider having the savings account at a separate bank. This way, your checking and savings account will not be connected, so you cannot easily take money out of it.
By having money taken directly out of your paycheck, you won’t really know that it’s missing, which will force you to live off of what you do have.
Another great way to start a savings account is to place any extra money you earn into a savings account. For example, if you get money for your birthday, a tax refund, or even win the lottery, place that money into a savings account. You’re already used to living off your budget, so just pretend that you never earned that money and put it away for a rainy day.
3. Pay down your debt.
If you have debt, the bills and interest could be costing you a fortune. In order to be financially responsible, you need to pay down your debt. One great way to do this is by using Dave Ramsey’s snowball system. Write down all of your debts, and put them in order of least amount to largest amount. Then, put extra money towards paying off the smallest debt first while paying the minimum amount on the others.
Once you have paid off that small amount, put the money you used to use to pay that bill every month towards your next lowest debt. Once that’s paid off, put that money towards the next bill, and so on until all your debt is paid off.
4. Downsize where you can.
Sometimes you spend a lot of money on certain items, such as your home or your car. If you truly want to get in control of your finances, you may want to consider downsizing. For example, if your children are grown and out of the house, you should consider moving into a smaller home. If you can make it work, try becoming a one-car family or trading in that luxury vehicle for something less expensive.
You could also try to downsize your utilities. For example, do you really need 1,000 television channels? If not, try lowering your cable package or eliminating it altogether and opting for a Netflix or Hulu account instead. Do you really need unlimited minutes on your cell phone? If not, opt for a smaller plan. Try to be creative with your expenses and find ways to save money.
5. Earn extra income.
Sometimes getting in control of your finances means earning more money. There are plenty of ways that you can earn some extra cash. You could try selling your unwanted items in a garage sale or through eBay or Craigslist. You could also get a part-time job at night or on the weekends. You could even work as a freelancer for an online transcription service. There are plenty of ways to earn some extra cash, so determine what you want to do and start there. Use the extra money to pay down debt or place into a savings account, and you’ll certainly be on your way to financial freedom.
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Guest Author: Lizzie Lau is a freelance writer who combines personal opinions and research to create appealing and informative articles on various topics.