It is not how much you earn, but how you use what you earn that will give you financial success. The problem for most people is that they don’t know how to manage their money wisely and end up struggling financially every two weeks or end of the month.
In this post I will share with you 5 of the strategies that I personally apply in my finances and that have allowed me to say goodbye to any money problem.
1. Eliminate debt
I have already mentioned it in previous articles and it is surely a topic I will write about again at some point. Eliminating debt is undoubtedly the first step to achieving healthy finances and boosting your financial development.
Debt keeps you tied to a job you don’t like, living in a house or neighborhood you don’t like and driving a car that spends more time in the shop than on the road.
But it doesn’t necessarily have to be that way!
It’s likely that the money you receive each payday, even before it’s yours, is already going to cover your expenses and debt, leaving you with virtually nothing to save or invest.
This way it becomes almost impossible to make a better life for yourself than the one you have now.
If you find yourself in this situation, getting out of debt should be your priority. But… how do I do it?
The key is to set aside a percentage of 10% to 20% of your monthly income to pay what you owe. To do this you need to eliminate any unnecessary expenses and obviously avoid acquiring more debt.
Part of that percentage you will get from limiting yourself in emotional purchases or ant expenses.
Most likely, this will initially tighten your finances a bit more, and it may seem like a very complicated thing to do, but believe me, doing so will lead to a better life in the future. Sacrifice a little now to live better later.
2. Make a budget
Do you know how much you earn and how much you spend each month, that’s how easy it will be to start with your monthly budget. Not knowing this information can give you a hard time with your financial situation.
Knowing how much you earn and identifying your monthly expenses will allow you to manage the rest of your money more intelligently.
I invite you to write down on a sheet of paper all your sources of income and the amount of money you receive from each of them.
Also make a list of all your fixed monthly expenses; that is, those you have to make on a mandatory basis. This can include paying for water, electricity, telephone, internet, telephone, etc.
This section also includes the costs of rent, transportation and food. It defines how much you pay for each one of them approximately.
Below that list, also write down your variable expenses, which are those that are not mandatory and that are usually different every month. Some examples are trips to the movies or eating out, you can also include seasonal expenses or some other services that are not essential and that you usually hire sporadically.
Finally, write down all your debts, starting with the smallest one and putting in last place the one that implies a greater amount of money.
At this point you should identify which of those fixed and variable expenses you can do without immediately and which you can eliminate progressively. Allocate that amount of money to your debts. Start paying from the smallest one and continue progressively.
Also, define a percentage to save each month. Try to get as close as possible to 20% of your total income.
Doing this exercise and applying these strategies with determination will undoubtedly improve your finances considerably in just a few months.
3. Automate your money
Today, through technology it is very easy to schedule your payments and generate savings automatically.
Nowadays there are many platforms that allow you to direct debit the payment of certain services, which will help you avoid extra charges for delays.
In case some of your expenses do not have this payment method, you can use your cell phone’s calendar and place a recurring reminder for the payment of each of your monthly expenses.
Something so simple can really take away a lot of headaches.
Likewise, I recommend that you look for savings systems that automatically discount your bank account. This way you will avoid spending the money you have set aside to save.
4. Compare prices before you buy
Never go for the first choice, it’s a tip that can save you a lot of money.
The Internet has become a very powerful tool to search for products and know their prices in different stores. Nowadays it is easy to know where you can get the best price.
Searching on the Internet will allow you not only to anticipate the amount of money you are going to spend, but also to know if the item you want to buy is a good one or not, since you will surely find testimonials from people who have already bought it previously.
It is also advisable not to get carried away by the fame of certain brands. Sometimes, you can find a product of equal or better quality for less money. It is only a matter of taking a few minutes to investigate.
5. Take out an insurance policy
Insurance protects you from those things that can come into your life in an unexpected way. Remember to always expect the best, but prepare for the worst.
Many people have ended up in serious financial problems because they had to cover large expenses, or even get into debt, as a result of an illness or an accident for which they were not prepared.
Insurance should be a fixed monthly expense so that you don’t become unsettled in the event of an emergency.
Remember that it is always better to be safe than sorry. Sometimes the payment of an insurance may seem something unnecessary, but creating this habit can protect you from situations that could lead you to ruin.
I recommend you to quote several insurances and know well what advantages each one offers you. Seek to know clearly in what type of situations your policy really protects you and investigate the policies of the companies in case something unexpected happens.
The more you know about it, the easier it will be to make a decision about which type of insurance suits your needs.
