Are you constantly struggling with personal finances, and always asking where your money went by the end of the month? If so, you are not alone. According to a study by Payroll.org in 2023, 78% of Americans feel like they are living paycheck to paycheck, which is a 6% increase from 2022. So, how can you get back control of your financial spending?
1. Take Inventory to Figure Out Where Your Money is Going
Assess your current financial state. How much do you earn monthly after taxes? What do you spend the money on? Categorize your spending so you can determine how much you are paying for everything.
2. See Where You Can Cut Back
What of those expenses are unnecessary? Are you paying for insurance coverage, memberships, or subscriptions that you never really use? Is there a way you can cut down on your water and energy bills to cut down on utility bills?
Review your spending for such and cancel such subscriptions to save more each month. Additionally, it would be best to pay your bills on time every month because it helps you prioritize essential spending and avoid late fees and penalties.
3. Develop a Budget and Live Within Your Means
Set a realistic budget that works with your lifestyle and spending habits. You can leverage online sites to help you come up with a budget. Such sites are helpful because they track your spending, consolidate all your transactions on various accounts on one site, and alert you if you start spending more than you budgeted for.
When developing a budget, it is important to set priorities. Loans can be helpful in some cases as in the case of emergencies, but in most circumstances, paying using cash is the cheapest option since you avoid generating interest which could lead to accumulating a bigger debt.
If you already have debt, priority should be given to mortgage, rent, or car payments over unsecured debt like credit cards. Also, find out whether your creditors might be willing to negotiate an affordable payment plan with you. It is also advisable to consult and work with a credit counselor agency to develop debt management and payment plans to help you get out of debt.
When you have paid all of your necessary expenses, remember to set some savings aside for emergencies to help you out of unforeseen financial situations.
4. Pay Yourself
Give yourself an allowance once all your basic needs and savings are catered for. This allowance is the amount you can spend guilt-free on anything you want, such as shopping, eating out, vacations, and entertainment. You can have it each month, but when it runs out, you must wait until the following month.
There is no one-fits-all approach when getting back control of your finances. Regardless of how high or how low your income is, what really matters is the ratio of what you make and what you spend. You must assess your spending habits, reduce unnecessary expenses, and develop a realistic budget.
Ultimately, educate yourself on financial management to help you make well-informed financial decisions that will help you in the long run.