It helps to look at practical financial tips if your goal is to handle your money better than before. It helps to use a practical approach in managing your finances to make it a lot more doable. When you are able to accomplish your goals, it serves as a mental win for you. It can nudge you to do better the next time. It pushes you to do more.
One thing you get out of this is creating that habit of working towards your goal. Habit formation comes from consistency. That is why the more practical and easy the steps are, the higher your chances of sustaining it over a longer period of time. Once you do that, you get to form the habit and it’s just a matter of making improvements as you go along. Here are a few of them to look into.
Set a goal with an end date
One of the simplest and most practical financial tips you can implement right now is putting a timeline on your financial goals. It might not sound like an important aspect but it actually makes your goals a lot more concrete. If you do not put an end date to your goals, you only have a wishlist with no definite end in sight.
It’s like saying you want to pay off your credit cards soon. Without a specific timeline on when you want to pay it off, it will just be a thought at the back of your head. But if you say you want to pay off your cards in 10 months, then that becomes totally different. You now have an idea of the amount of work you need to put in.
If you want to pay your cards off in 10 months, that becomes your timeline. You start working backward to know how much you need to pay every month. This now allows you to divide the work you need to put in to pay off your debt within 10 months. This gives you a clear path to take and a concrete action to follow.
Create a realistic budget
You might know by now that you need to put together a household budget to help guide your expenses on a daily basis. But you need to keep in mind that your budget has to be realistic. This is one of the practical financial tips you have to remember when creating a budget. This is most helpful especially if you are trying to re-evaluate your budget.
A realistic budget starts with making sure you list down all your sources of income and all your expenses. Missing out on one detail can put your whole budget in shambles. If you miss a payment due date, you could be looking at a bigger amount due next month. This could disrupt your whole budget especially if you are already having a hard time making ends meet.
A realistic budget also means that you have to put in all accurate and attainable goals. Once you have the right figures, you also have to make sure your goals are realistic. You cannot put 90% of your income into your retirement savings and expect to pay for several credit cards and cover basic necessities. Be realistic with your goals so you do not put other areas of your finances in peril.
Stay on top of your expenses
One of the practical financial tips that can help you manage your income better is keeping tabs on your expenses. One thing this can do is help you stretch your finances during difficult times. This is important since Pew Social Trends shares that 46% of lower-income adults had trouble paying their bills since the health crisis started. Just like how the health crisis affected a lot of people which led to people losing their jobs. They suddenly found themselves trying to stretch whatever savings they had.
Monitoring and cutting down on your expenses can help you manage your finances better during difficult times. It helps if you have a comprehensive household budget on hand. You simply look at the expense side and start cutting back on non-essential expenses. That list also gives you the chance to monitor each and every item you spend every month.
Remember also to have a clear line between your wants and needs. This is because there are times when you justify your wants as needs. Take your food for example where you could justify take-outs and delivery as a necessity. But if you start to prepare your own meals ahead of time, you will find that you can save a lot of money just with your food expenses.
Live below your means
One of the practical financial tips you might have heard people say is how a frugal living can help you manage money better. This is where you make an effort to live below your original budget. You force yourself to save money by not spending what you have budgeted for. It sounds impossible and scary but it can actually help you tap into your creativity.
One area in your budget you can be creative about could be family entertainment. In the past, you might drive the whole family to the movies and have dinner after. Now, you can still do the same in your living room with home-made popcorn. Family vacations could become staycations in nearby places or even in the comfort of your own backyard.
Your transportation cost could go down if you can take a bike to and from work. This can work if your office is within biking distance from your house. More than saving money, you also get to put in some exercise in your day. Biking increases your heart rate up and gets you some cardiovascular workout every day.
Pay off debt
Debt is part of life but it does not mean you need to carry it your whole life. There will be some that will take a long time to pay off like your student loans. There are also some types considered to be good debt like your mortgage loan. So it is a good idea to classify the types of debt accounts you have so you can prioritize which ones to pay off first.
There are several strategies you can choose from like debt consolidation. It allows you to combine most of your debt payments under one account. It makes it easier to monitor several payments if they are all under one payment. There are also instances where your monthly payment could be lower than what it used to be.
You can also look at a snowball or avalanche payment method. A snowball method is where you focus on paying down the smallest accounts first. This gives you those mental wins you can use to push you forward. Avalanche method targets the payments with the highest interest rate. This helps you save money which otherwise would simply be used for interest payment. Check your current financial status and see which strategy will work to your advantage.
Diversify income sources
One of the best yet practical financial tips you can consider is diversifying your income sources. It’s good to have a stable career as a source of income. But it helps to have options, especially at this time. When the health crisis hit and a lot of people lost their jobs and having a secondary source of income could be the difference between food on the table and going to bed hungry.
To help make it easier, you can first look at the things you love to do or your hobbies. This is because there are people who actively look for a way to earn from these. It’s called an income positive hobby. Say you know how to create digital art – why not offer your services to businesses around your area? You can also reach out to your network to check if they know of any freelance work that revolves around your hobby.
There are a lot of practical financial tips you can consider to help you manage your finances better and reach your goals faster. Take a look at some of them and see which one works best for you.