Now that Christmas is a distant memory and the New Year’s celebrations have come and gone, it’s time to think about getting your finances back on track. I’m sure your wallet took quite a hit over the holidays — I know mine did. I used to find it a little frustrating trying to make up for my holiday spending, but over the years, I’ve learned a few tricks that really help recoup and even get ahead in the finance department.
Budget, Budget, Budget
I know I’ve said it before, but I’m going to say it again: the only way to live within your means, pay off bills, and actually get ahead is to create a budget and stick to it. Making a budget is simple and will make it super easy for you to see exactly where you should spend less and save more.
- Calculate your income — include everything that comes into the household.
- Figure out all of your recurring monthly expenses such as utility bills, credit card payments, mortgage, car payments, etc. Include food, cable and phone bills in here, too.
- Subtract the payments from the income. If your monthly bills exceed your income, it’s time to take a close look at areas you can cut back to free up money.
- The difference you have left is disposable income. Be wise with how you spend disposable income. This amount should be where you pull money to put into a savings account.
Pay Down Debt as Fast as Possible
Most people have at least one monthly payment to something. Whether it’s credit cards, a mortgage or a car payment, it’s in your best interest to pay above and beyond the minimum payment when you can. Doing so will save you a ton of money in interest payments. For instance, did you know that by making just one extra house payment a year, you can cut about nine years off a 30-year mortgage? I don’t know about you, but not having to pay nine years-worth of mortgage payments sounds pretty good to me. Begin saving now to make that extra house payment before the end of 2014.
Check your Credit Report Religiously
Identity theft is a fact of life these days. Victims of this crime are often left with no savings and a destroyed credit rating. While not something that actually helps your financial situation, checking your credit rating every six months can help you identify mistakes on your credit report and flag any suspicious activity that may potentially leave you broke. You can never be too careful where your money is concerned, so be sure to monitor and protect what’s yours.
Don’t Forget to Pay Yourself
When you’re creating your budget and allocating money for this bill or that, don’t forget to designate some funds to put into a savings account. As a matter of fact, I make it a point to set this money aside first. Even if it’s just $10, I always make sure I pay myself first. As you get better at making and sticking to your budget, you’ll find it easier to allocate money to savings. Start slow — every payday put $10 into your savings account and work up from there as you pay off your debt.
Don’t Open any New Lines of Credit
I’m of the mind that if you can’t buy it with cash, you probably don’t need it. Of course, there are exceptions (like house or car repairs), but for the most part, you really don’t need credit cards. If you’re serious about getting your finances back on track and saving for your future, get out of the habit of relying on plastic and don’t open any more lines of credit if you can help it.
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