Being “good with money” means different things to different people. Maybe it’s having a lot of savings, zero debt or a big investment portfolio.
For those who don’t have those things, it can feel hopeless. The good news: If you consider yourself bad with money, that’s probably not the case. You simply need to learn a few basics. So if you’d like to get your finances on track once and for all, consider these tips from money experts.
Normalize Looking at Your Money
One of the major reasons why people don’t develop good money habits is because they’re ashamed or afraid to know what’s really going on. “If, instead, an individual looks at their money regularly, they will be able to see it more objectively,” said Kimbree Redburn, an accredited financial counselor and financial coach at Illuminate Financial. “They will notice trends and patterns and will better understand the flow of money into and out of their account.”
Redburn suggested setting up a weekly check-in with your money — 15 to 20 minutes is plenty. “Put the meeting on your calendar and honor it like you would any other commitment,” she said. Next, sit down and look over your previous spending for the past week. Ask yourself whether it was in line with what you expected, or if changes need to be made. Then look ahead at the week ahead, and make a plan for covering the bills and other expenses you have coming up.
Try a Zero-Based Budget
To take control of your finances, you need to tell your money what to do and when to do it, explained Eric Bowie, owner and founder of Smart Money Bro. And that requires having a budget. “I recommend a zero-based budget,” he said.
This means setting up your budget so that your income minus expenses equals zero. In other words, every dollar you earn has a job to do, whether that’s paying a bill, paying down debt or going toward savings and investments. “A monthly budget where all of your money is spent on paper, is the ultimate top-down management of your finances,” Bowie added.
Know Your Triggers
If overspending is an issue you’d like to work on, take some time to reflect on when most often feel the urge to spend. How do you feel, and what do you buy most often? Identifying your spending triggers can help you change your behavior and avoid impulse purchases, according to Adrienne Taylor-Wells, an accredited financial counselor and owner of Tailored WealthSaver.
“To complete this task, you must track your emotions and write down each transaction you make,” she said. “This will help you become aware of the moments you most often want to spend money.” From there, she recommends creating money goals in a stress-free environment. Write them down, along with a plan to reach them.
Take Time To Cool Off
Another helpful tip for overspenders is instituting a cooling-off period before making purchases. “This is especially useful for big-ticket items,” said Julie Ramhold, consumer analyst with DealNews. For example, if there’s something you really want to buy but don’t necessarily need, give yourself 24 hours or more to think about it.
“If you forget about the item, then maybe you didn’t want it as much as you thought, and you saved money by holding off,” Ramhold said. “If you still feel the same, then you can make plans to purchase it.” Just be sure you have the savings set aside; don’t buy it right away unless you can afford it.
Pick a Debt Payoff Strategy
“If you’re feeling overwhelmed by debt, the best thing you can do is get organized to put together a plan to pay it off,” Ramhold said. Fortunately, you don’t have to come up with a plan from scratch — there are tried-and-true strategies you can use.
For example, the “debt avalanche” method involves paying the minimum on all of your debts except for the one with the highest interest rate. That’s the debt you’ll focus on getting rid of first, putting all of your extra funds toward it. Once it’s gone, you’ll do the same for the debt with the next-highest rate, and so on until you’re debt-free. This method will save you the most money in interest charges.
However, some people need a different kind of motivation. That’s where the “debt snowball” method comes in. You make a list of your debts from smallest to largest, then focus on paying off the smallest debt first while paying the minimums on the rest. By knocking out quick wins right away, you’ll feel encouraged to keep going and tackle your larger debts.
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