People suffer from all different kinds of problems where their personal finances are concerned. Some can’t seem to escape the cycle of living paycheck to paycheck, while others are so deep in debt they have no idea how to dig their way out. Some have feelings of shame or remorse tied up in their spending habits, while others are shopaholics. But one thing is certain: many of us have to learn about personal finance the hard way. Despite our many years of schooling, finance classes are not a mandatory part of the standard educational curriculum, leaving most adults to figure out this vital part of modern life on their own, often with serious consequences. But if you’ve suffered financial failures and you’re looking for a better way to manage your money, here are just a few easy and effective ways you can begin to improve your personal finances.
1- Learn to budget. This is the number one way to start improving your financial situation. When you understand how to create a budget that balances your income and expenses, you can not only become aware of what you’re spending (and why you’re in debt), but you can start to make the changes necessary to turn your finances around. And once you get back on track, you can forge a future in which you are personally empowered where your money is concerned, where you always have control of your spending and you can start putting money away for a rainy day or retirement. This will give you a sense of security and create a strong financial future.
2- Pay down credit. No matter how much money you owe, it’s never too late to start paying down debt and improving your credit. Of course, it can be difficult to do this on your own, even with a solid budget in place. In this case, you might want to take the help that is available to you via debt consolidation or debt relief services. With professional help you may be able to swing some amount of loan forgiveness, negotiate with creditors to disburse some portion of debt and/or create tenable payment plans, and consolidate debt to reduce interest payments. All of this can help you to reduce your debt more quickly and get back on track financially.
3- Start a savings account. The value of having cash on hand cannot be overstated. So even if you’re only able to put five dollars a week in savings by skipping a Starbucks run, it’s important to start somewhere. You may just want to set up a separate savings account that you don’t touch to help stave off the temptation to spend that money.
4- Check your credit report annually. Improving your credit is an important part of managing personal finance since it impacts your ability to take out home, car, school, business, and personal loans, or even get a credit card or lease an apartment. So order a free report annually from AnnualCreditReport to become aware of your score, deal with any lingering black marks, and find ways to improve.
5- Separate money and emotions. If you want to improve personal finances, you have to learn that using money need not be an emotional activity. Money is a tool – a means to an end. And while there are often emotional side effects of the uses we put money to (enjoying personal freedom, buying gifts for loved ones, purchasing a home or seeing the world, etc.) it’s important not to equate feelings of joy, anger, sadness, shame, and so on with money. It can warp the way you manage your personal finances and lead to all kinds of needless financial trouble.