Now that 2015 is here, wouldn’t it be a great time to start making plans to grow your money? The beginning of the year should encourage you make plans for your financial future. That being said, we are offering you some personal finance tips that you may want to implement in your life this new year.
In truth, there are so many things about your finances that require improvement. You need to pay off your debts, grow your savings or your investments. But did you know that concentrating on increasing your discretionary income can help you improve all of these? Not only that, the methods the you will use to grow your money will help you improve your financial management skills.
According to a survey done in March 2014 by CreditCards.com, American consumers seem to be slipping back into their old financial habits. Apparently, more people do not prepare a budget while those who are lowering their spending seem to be falling. The survey done by the site revealed that more than half of their respondents said they do not use a budget to monitor and manage their finances. When it comes to decreasing what they spend, the current percentage is now at 29% – a far cry from the 57% of the 2009 respondents who made efforts to lower their spending.
If this is the statistic that we will look into, it is obvious that we need to improve on a couple of financial habits. With the tips that we have in this article about growing your money, you may be able to develop the financial habits that were lost in 2014.
5 tips to increase your discretionary income
What exactly is your discretionary income and how can it grow your money. When we say discretionary income, this is the money that you have left after you have paid off your usual expenses. The monthly expenses refer to your utilities, rent or mortgage, transportation, food and groceries, insurances, education and even child care. Once all of these expenses are deducted from your net income, the result will be your discretionary income.
Now there are two simple ways for you to increase this part of your income. The first if to earn money so you have more left even if you do not change anything about your expenses. The second is the opposite – you will lower your expenses so it will not eat up too much of your income. That way, you do not have to make the effort to earn extra money and still increase your discretionary income.
Here are 5 specific tips that you can use to help your grow your money this year.
- Choose to cut back on housing expenses. This is applicable to those who are currently living in areas with a high cost of living. You may want to relocate to a place where the prices are not as expensive. For instance, living in Florida is more economical compared to living in New York City. One of the biggest expenses that you want to lower is your housing cost. If you can rearrange your life in such a way that moving to a low cost city is possible, then this is something that you may want to consider. According to Forbes.com, the most affordable city in the US is Buffalo – which can also be found in the state of New York. Other cities in the top 5 include Memphis, Cincinnati, Dayton and Knoxville. In case your work will not permit it, maybe moving to a smaller home can help you cut back on your monthly expenses. After all, a smaller home means lower utility bills too.
- Lower transportation costs. Another expense that you can cut back on is the transportation. Instead of riding your car everyday, why not carpool with neighbors or friends who go the same way as you and work in the same area too? If the distance will allow it, you may want to bike to work – or walk. These two can be great alternative to cut back on cost and stay healthy too. A bit of exercise will never hurt anyone. In case you really need a car, make sure you opt for models that are fuel efficient and in very good condition. You do not have to buy a brand new car if you do not have to. But it is very important to choose a car that will not cost too much in terms of maintenance and repair costs. That should help your grow your money.
- Check if you can lower your bills. There are bundle programs from telecommunication and cable companies that you can avail. Bundling could be a great way to lower or eliminate some of your bills. Sometimes, bluffing to transfer to another service provider could force your current to give you better offers.
- Request for a salary increase. Some people are lucky enough to automatically get an annual raise. In case you are not one of them, why don’t you take matters into your own hand by talking to your employer about it? In most cases, people do not really consider this as an option to increase their discretionary income. But if you have aces up your sleeve like meeting your quota consistently or acquiring a new skill, then do not hesitate to ask for a salary increase. This would keep you from working longer hours or cutting back on expenses without compromising your ability to grow your money.
- Declutter your life and be a minimalist. Most of us acquire junk over time. We buy stuff or receive gifts that we do not necessarily need. Or maybe, we have reached a point in out live when some possessions are no longer needed. Things like old toys, clothes, outdated furniture and gadgets – these are some things that you can get rid of by selling them. If you have a TV in every room in your house and you really only need one, why don’t you sell the other units? Not only will you save on electricity, you can also earn profit from the sale.
These are only some of the things that you can do to grow your money each year.
3 smart ways you can use the additional extra money
When you have successfully increased your discretionary income, that is not the end of the road. You need to know how that extra money is to be used.
According to an article from Mainstreet.com, people would rather save their money this coming 2015. The poll was done by GOBankingRates and revealed that 37.4% of consumers will save their extra money this year. Next to that, 24.6% plan to pay off their debts. 15.1% plan on improving their spending habits as a way to improve their finances in 2015.
These are actually some of the things that you may want to look into after you have succeeded in growing your money. Although the poll shows otherwise, here are the top three things that we suggest you do with your extra money.
- Build up your emergency fund. This is the first that you should look into. If you do not have emergency funds, it is time to save up for it. Target around 6 to 9 months of your monthly budget. That way, if something happens, you can live off this fund for the next few months while you put your finances back together. This is one of the ways that you can prepare for the unexpected. Not only that, you can also keep yourself from borrowing money so you can finance any unexpected expense. It is a win-win situation.
- Pay off your debts. This is especially true if you have high interest debts. You want to make sure that you do not waste any more money on paying these interest amounts. After all, it is only making your creditors and lender rich. Keep that money for yourself by getting rid of your debt once and for all.
- Invest your money. One of the best ways to grow your money is to invest it. Instead of putting in a savings account, you might find that it will grow faster if you invest it instead. Of course, there is a bit of a risk but if you play your cards right, you could increase your finances in ways that you never imagined before.
You see, to grow your money this year can only benefit you if you know what to do with the extra money. If you decide to spend it senselessly, then you would have lost all the potential to increase your personal net worth.