You do not need earth-shattering financial moves in order to improve your personal finances. Believe it or not, some people are hesitating or have given up on their finances simply because they think it requires a huge effort.
Admittedly, there are big financial habits that can revolutionize your financial situation. However, it is not always necessary. There are small moves that you can do to improve your personal finances. The key is to consistently do them. Slowly but surely, these small moves will bring about a significant change in your life.
Since they are small, you hardly have to change anything about your lifestyle. That makes it easier for you to adjust to it. But even if they are seemingly small, this can still make a difference in your life. You just have to make sure you are doing the right financial moves.
Here are four of these financial habits that may seem small, but if consistently done, will lead to a significant change in your life.
Financial move 1: Saving the change
The first financial move that you can do is saving the change that you have at the end of the day. It does not matter if you only have a penny or a couple of quarters. You should put it in a jar and forget about them. This should be an easy habit to develop. Consumer spending trends reveal that after the recession, a lot of us got into the habit of searching for the cheapest products. We are bound to try to spend less than what we used to. That could mean we are expecting to get some change all the time.
Discipline yourself so you will put all the coins that you have in your pocket or purse away. Do not spend them and be strict about it.
Some of you might think that this is a useless habit to develop. How can some coins or a few dollars improve your life? Let us do the math for a second.
Let us assume that you consistently put change in a jar at the end of the day. If the change averages a dollar each day, that means you will get $30 at the end of the month. If this continues, you can have $360 a year.
It is not a staggering amount but it is still something. You can buy 1 to 2 weeks worth of food with that amount. And if you commit to putting $2 in your jar – you have $720 worth of extra money to spend. Or save if you want to be smart about it.
The key to making this work is to consistently save the change. After all, it is such a small amount anyway. You can afford to put this aside each month.
Financial move 2: Making extra payments
The next of the financial moves that you can work on is making extra payments. If you have debt, this is one of the best ways that you can pay it off faster.
According to the data provided by the New York Fed, the total household debt has now reached $12.73 trillion. This, apparently, is the new peak. The biggest part of this debt is still mortgage loans but credit card debt seems to be growing. The latest data revealed that it is currently down from the last quarter but it is still a fact that it now as high as the pre-recession levels should worry us.
What makes credit card debt scary is the fact that it has high-interest rates. We all know how that can help significantly increase your balance if you fail to pay it off. This is why if you have accumulated credit card debt, you have to make sure that you can completely pay the debt back.
One of the best ways to do that is to pay a little extra. In fact, this is not just something that you can do for your credit cards alone. You can do it on practically all your debts – mortgage, car loans, etc. It is also possible with student loans but you have to have the right type to be able to do this.
When you make extra payments, it will help reduce your balance and will also decrease the effect of the interest rate on your debt. If you have the extra money, you may want to make a bi-monthly payment on your credit card debt. Or if you can make a lump sum amount, you can pay off the debt so you can get rid of a huge chunk of it.
Financial move 3: Organizing your finances
The next of the small financial moves that you can make is to organize your finances. This may not seem like a proactive way of improving your financial situation. However, it is more beneficial than you think.
Once you organize your finances, it will be easier for you to keep them under control. Otherwise, you will find that all the details of your personal finances can be quite overwhelming. During the process of organizing your finances, you can re-orient yourself with what goes on in your financial life. You can take another look at your debts, monthly payments, and income. It will help you identify any problem areas that need to be solved. Sometimes, people find themselves feeling stressed and unable to pinpoint what is wrong. But after taking a look at their finances, they realize just how much debt has already accumulated in their life.
Managing your finances include having financial plans like debt management to help you pay down what you owe. Experts reveal that it is all about making smart decisions about your debts. Once you have organized your finances, you will be in a better position to decide on what to do with your debts. You now know how much you owe and your capabilities in paying it back. These two are the most important factors that will influence your decision when it comes to choosing the right debt solution.
Financial move 4: Planning for the future
The last of the small financial moves that you can do is to plan for the future. This seems generic but having goals in your life will give it direction. It will help manage your finances a lot easier.
Think about what you want to have in your future. Do you want your own house? A new car? Do you want to be debt free? What type of retirement do you plan to have? These are all great financial goals. If you want to make them come true, you need to plan for them.
That means you have to start coming up with financial plans. You need to make sure that you put aside enough money to save up for the downpayment on your house or car. You should also start saving for your retirement. It is also important that you have a concrete plan to pay off your debts.
It all seems tiring and tedious to have all of these plans in place – but it is necessary. It will be harder to reach your goals unless you have one. Your plan will tell you what step to take next and how much you have progressed since you started. These things are important if you want to completely reach your goal.