Once you have decided that the only way forward to make that dream home purchase…
If you’ve had a hard time financially for a while, you may feel somewhat averse to sorting through the details of your financial situation. This is a very natural feeling, but you’ll have to bite the bullet eventually. And once you start taking steps to control the situation, you’ll feel more accomplished and may even be relieved to know exactly where you stand. Here are some quick tips to start getting on top of your financial situation.
1. Look at your finances every day
Awareness is the first battle. You may think you know how much you’re spending, but until you start keeping an eye on your financial habits and situation regularly, you won’t be as aware as you need to be. So you need to take the time to look over your finances every day. Some small daily habits you could incorporate include:
• Check your bank account daily
• Check your financial spending tracker or budgeting app daily
• Balance your checkbook or budget daily
Once you start to get into the habit of tending to your finances every day, you’ll be able to identify patterns and figure out which spending habits need to change.
2. Assess your income to spending ratio
To get a clear picture of where you are financially and what steps you need to take first, you’ll need to know how your spending compares to your income. Spending includes your current living expenses, debt payments, subscriptions, recreational spending, and anything else that uses up money.
Go back and look at everything you’ve spent over the past month, then compare it to how much money you’re bringing in. If your spending is greater than your income, you’ll need to cut back on your spending to improve your financial health.
3. Make a conscious effort to choose free things
In some cases, just substituting free activities for some of your current hobbies or social events could help you cut back on expenses. This, in turn, can improve your spending to income ratio, allowing you to live within your means and cutting down on financial strain.
For instance, if you stream some TV shows through your library instead of renting them, you can save money on your entertainment category without skimping on entertainment value. Other free items and activities to look for include:
• Free workout classes (such as through your library or community center)
• Free workout, yoga, or ballet videos on Youtube
• Special promotion deals that offer free ebooks
• Community events such as free reading groups and other social groups
• Free software alternatives to replace paid subscriptions
The more time you spend enjoying free activities, the less time you’ll have open for more expensive activities such as shopping.
4. Cancel subscriptions for a couple of months
You can’t cancel your utilities and other obligations (such as debt payments or child support), of course. But if you have any subscriptions, memberships, charity or political donations, or similar nonessential items that are billed monthly, you should consider canceling them temporarily.
Make a list of these payments and try adding up all the ones that you might be able to live without for a couple of months. Then imagine how that amount of money could help you start to catch up with your financial goals, such as getting out of debt or building your savings account.
5. Get free help online
If you’ve decided to spend some time tackling your financial situation, you may feel the need to spend money on self-help books or classes to help you get started. However, you can find lots of free financial help online. For instance, you’ll find Youtube channels, podcasts, Facebook groups, and other resources dedicated to things like saving money and paying down debt. You can even find free trials of budgeting software.
Start by making use of the free help available online. Then, once you have the basics down in a few weeks or months from now, you can decide if your situation warrants the expense of a paid class or budgeting software.
These five steps can help you make progress away from letting your money slip through your fingers and towards more conscious, mindful control of your finances. Then you’ll be in a position to start taking control of each paycheck and channeling it towards the uses that will provide the most benefit to you.