Improving your financial well-being can be as simple as implementing a few tips. In fact, little changes and moves are often more impactful over time than a one-time monumental change. If you’re looking for ways to help improve your financial health while keeping it simple as you settle into a stronger financial state, here’s everything you need to know.
Track Your Spending
The first thing to do when trying to better your financials is to monitor your spending trends. It’s impossible to change things without fully understanding them. Take some time to sit down with bank statements in hand to run through your spending.
It’s much easier to decide on what needs to be cut out or which bad habits you have when you take the time to run through at least a month worth of statements. To take it a step further, grab a few multi-colored highlighters and color-code which expenses were mandatory, which were wants, subscriptions, and similar categories.
Create a Budget
When you have a good grasp on your spending, you can more easily create a budget that works for your needs. There are plenty of budgeting types out there and methods that individuals swear by. However, the right option for you is the one that works with your lifestyle and needs, not against it.
Whichever way you decide to structure your budget, begin with carving out enough for needs, then factor in wants and other miscellaneous costs to understand what you should be spending in each of those areas.
Build a Credit Score
Credit makes the world go round, especially when it comes to personal finance. If you’re ever looking to purchase a car, borrow from the bank for an unexpected expense, or even move, credit plays a huge role in your success of that.
In other words, living without a good credit score can make life very difficult. When you’re looking to improve your personal finance, building your credit score should be one of the priorities. Luckily, it’s simple to do.
Factors that determine your credit score include your debt-to-income ratio, credit utilization ratio, payment history, and account mix and age. Knowing this can help you target areas that may be hurting your score.
Reduce Your Debt
Your debt-to-income ratio not only impacts your credit score but can severely affect your financial well-being in day-to-day life. With a large debt amount, your daily income stops being money that you have access to for important things like saving and investing, and instead becomes obligated to debt repayment.
If you’re constantly in repayment mode, it can be virtually impossible for you to ever get ahead on your financial goals in life. To keep more money in your pocket, avoid high-interest rates and negative marks on your credit, and make debt repayment a priority as you tackle your financials.
Retirement is often something that people put off, believing that it doesn’t matter yet. That couldn’t be further from the truth. The effort you put into retirement now can heavily impact your readiness for retirement decades down the line.
If you’re not familiar with how early investments can compound and equal big retirement savings later on, take some time to learn about the different methods of retirement and what the processes look like for each. For example, diverting funds to a private financial manager for the purpose of preparing for retirement will look much different than how your employer-sponsored 401k grows.
The Bottom Line
Personal finance can look different for everyone, but there are a few core components to watch out for. From tracking your spending to prioritizing the things that matter now and down the line, there are plenty of small changes to help guide you toward the financial status you hope to achieve.