Simple financial fitness can help you do better with your money.
Over time, you can learn to save, invest, and make a budget, which are all money habits that can change your life. You probably have everything under control, but it’s still a good idea to take stock every so often and ask, “How can I improve my process so I can reach my financial goals faster?”
No matter how much money you make or how much you know about managing money, you can give yourself more power by taking steps to improve your financial health. If you haven’t done much to improve your financial health, now is a great time to start!
Use our five-step guide as a reminder or as a place to start.
#1: Know how much money you have
No matter how much money you have or don’t have, it’s always a good idea to take a long, hard look at yourself and figure out how you feel about money and how you handle it so you can stop the bad habits.
#2 Make a spending plan
A structured budget is your north star that helps you keep your eye on the prize. It forces you to make a plan for your money, save money, and keep track of your progress. What it does is make your dreams come true. Imagine if you just went through life buying whatever you wanted. How would you ever save enough for a down payment on that fancy condo you’ve been wanting or a two-week trip to Japan?
The 50/30/20 method is a simple way to get started if you don’t want too much trouble. It’s a plan that divides all of your money into three categories: needs (essentials), wants (non-essentials), and savings (financial goals). By making a 50/30/20 budget, you can see where your money is going.
“Needs” includes things you can’t live without and bills you have to pay. Here is where you pay your mortgage, groceries, insurance, health care, and utilities.
“Wants” include things like a Disney+ subscription, going out to eat, and that extra bag you want to add to your collection. This category is also called “personal spending” or “spending you choose to make.” Think of things you’d like to have but could get by without. These are the bells and whistles that make life a little bit more fun.
The word “savings” refers to the money you put away to reach your financial goals. It could be money for an emergency fund, a down payment on a new home, or extra payments on your loans so you can pay them off faster.
After you’ve broken down your budget, you can figure out where you want to save money and make changes.
The exact amounts will be different for each person, but 50/30/20 is a good starting point.
Here is a simple budget template if you’d rather make your own. Or maybe you like details, in which case you might like this. You can also find templates on Google Sheets, Microsoft Excel, and other sites online and download them. Or just start all over!
There are many ways to make a budget and stick to it. No matter how much money you make, it’s a good idea to try to be more responsible with your money. Remember that the best diet and the best budget are both the ones that work.
#3: Set up a fund for emergencies
Having cash on hand in case of an emergency is the best way to avoid stress. Layoffs, sudden health problems… Since life is hard to plan, why take chances?
What should a fund for emergencies cover? Basic costs must be paid, like a mortgage or loan, insurance premiums, utilities, food, and transportation.
Whether your savings are strong or weak, the same advice applies: Set a reasonable monthly savings goal and stick to it, no matter what. One way to stay on track without worrying is to have the money taken out of your bank account every month and put into a different bank account.
#4 Start over with your money
The little pieces of plastic are both a blessing and a curse. If you know how to use them right, you can get cash back or rewards points without paying any interest. However, if you are a big spender who doesn’t watch how much you spend, they can be a curse.
The interest that builds up on a credit card balance that isn’t paid off is excruciating, and usually double-digit interest rates make it a huge problem for your financial health.
To get out of credit card debt, think about a balance transfer programme, which uses your available credit card limit.
By putting all of your credit card debt from different sources onto one card with 0% or an attractively low interest rate for certain repayment periods, like a Standard Chartered Card Credit Funds Transfer*, and focusing on paying it off as quickly as possible (before the special interest rate goes back to the original! ), you will soon be debt-free.
If you can’t put all of your balances on one credit card, use two or more cards. But the routine is always the same: don’t add new charges and make payments on time.
#5: Think about why expensive things are so expensive
Big-ticket items, or BTIs, are big purchases that usually last a long time and cost a lot of money, like a car or a house. A purchase like this is usually made after careful, deliberate thought.
But sometimes BTIs that weren’t on the original list of things to buy turn up. Then what?
First, take some time to figure out why you want to buy something and how it will affect your other financial goals. Ask yourself questions like:
– What would I have to give up to get this?
What do I get from buying this, and is it a good deal?
If you’re happy with your answers and have done the math, go ahead and spend, but be smart about it. What can also help is discovering Tenjin AI and see how we can add value to your investment goals.