There are many books out there on taking control of your finances, from how to get out of debt to how to build an investment portfolio. Books offer a great way to change your approach to managing money. To boost your savings, you can buy used financial books online or borrow them for free at your local library. Consider audiobooks if you would rather receive the advice by ear. To start, write down your income and all your expenses, and then subtract the expenses from the income to determine your discretionary spending. At the start of each month, set up a budget to allocate how discretionary funds get spent. Track the spending over the course of the month, and at the end of the month, determine whether you stuck to the budget. If you spent more than you made, you can fix your budget by cutting unnecessary expenses or earning more if possible. Implement the revised budget the next month to start living within your means. While you may not be able to reduce certain fixed expenses, such as rent or a car payment, without drastically altering your lifestyle, you can reduce variable expenses, such as clothing or entertainment, by being flexible and thinking frugally. You can, for example, reduce electricity consumption to lower your utility costs, choose different providers for your home or life insurance, or buy your food at a discount at bulk stores. You don’t even have to give up TV altogether. “Cutting the cord,” that is, eliminating costly cable services in favor of low-cost streaming services such as Netflix and Hulu, allows you to watch the shows you love without spending a ton each month. If, after reviewing various streaming options, you’re still determined to stick with your cable provider, downgrade to a cable package with fewer channels to save a little money every month. Start small by cooking at home at least once a week. The next week, start taking your lunches to work. You may be surprised at just how much you can save. Brown-bagging it can save you $1,300 per year, or more than $50,000 over a 40-year career. One alternative is to use a menu-planning service such as eMeals or PlateJoy to take the effort out of shopping and cooking altogether. These services allow you to choose recipes and have a list of the necessary ingredients sent to your local grocery store for fast pick-up. However, these services cost money, so you’ll need to evaluate the cost and determine whether using them fits into your budget. Start by listing all of your current debt, be it credit card debt, student loan debt, or a car loan, and figure out the minimum amount you owe to remain current with each one. Simply paying the minimum amount won’t get you out of debt quickly, so evaluate your fixed expenses, and determine how much of your discretionary spending budget you can allocate toward debt repayment. Try to reduce the interest rate on the debt by asking the issuer for a lower rate, consolidating multiple debts into one, or transferring high-interest debt to a low-interest credit card, such as a balance-transfer card. Then, set up a debt-payment plan, and adopt sound spending habits to pay off the debt as quickly as possible. If you really want to take control of your finances, stop using your credit cards. In addition to setting up a budget so that you don’t have to buy things on credit, switch to cash or debit cards to avoid accruing more debt; open a short-term savings account, and draw from it for large expenses; or leave your credit card at home so that you’re never tempted to pull it out of your pocket and swipe it. You don’t have to drastically step up your loan-repayment schedule, either; by paying half your student loan amount every two weeks, you will make a full extra payment every year. Some lenders will even reduce your interest rate by around 0.25% when you sign up to make automatic loan payments. This may be money that you save on your grocery budget each month, a tax refund, a set amount that you put aside from each paycheck, or an amount that you’ve allocated in your budget to save each month. No matter which option you choose, and no matter how little you save, look for ways to increase your savings over time. Small gains will amount to big returns over the long run. Often, these are month-long periods of curtailed spending that make exceptions only for essential spending categories, such as food, transportation, and recurring bills. If you’re willing to live like a minimalist for a brief period of time, commit to this challenge to pad your checking account, change your habits, and evaluate what you need rather than just what you want. The experience may even permanently improve your outlook on money. It’s similar to a budget, but it covers a longer time horizon of 10, 20, or 30 years down the road, whereas a budget is a short-term plan for the weeks or months ahead. The two work hand in hand, which is why a budget is often a component of a larger financial plan. These plans can also help you with your finances by prioritizing your goals, as it is often more effective to focus on one or two financial goals at a time. Your financial plan should include events such as buying a home, saving for retirement, and paying for your kids’ college education. As you set your goals, ensure that they are realistic. For example, don’t set a goal to pay off $40,000 in debt in a single year when your salary is only $30,000. Unrealistic goals that set you up to fail can discourage you from making the right financial moves in the future. Finally, track your goals over time so that you can see how much you have accomplished. For example, most modern brokerage firms offer tools on their websites that let you monitor your investment portfolio gains and losses over time. These tools can help you stay on track when you are working toward a long-term goal. If the idea of investing intimidates you, enroll in a class on investing basics, meet with a financial advisor, or talk to a trusted family member or friend who has experience in the area. While investing comes with risks, investing consistently and spreading your money in the appropriate percentages across diverse asset classes (stocks and bonds, for example) can help you maximize your gains and limit your losses. Solutions include moving your savings to a certificate of deposit (CD), from a brick-and-mortar bank where the funds are easily accessible, to an online bank where the funds are less liquid, or starting an emergency fund at a separate bank from the one you regularly use. If you are out of debt, work on increasing your savings. How much you should save depends on how old you are when you start. If you’re in your 20s, you can get by with a contribution rate of 10% to 15% of your income, whereas someone starting to save in her 40s should contribute as much as 35% of her pay toward retirement. The earlier you start to save, the better for your wallet, both now and in retirement. If you can’t change jobs, look for opportunities to generate income on the side or in addition to your job. Passive income from a rental property is another way to build wealth or find more money to get yourself out of debt. Ensure that you have the skills you need to stay competitive in the workplace. This may mean taking extra certifications or getting training through your current employer, or heading back to college for a graduate degree that qualifies you for a more stable profession. While you may be tempted to skimp on insurance, remember that it protects you from catastrophes that can send your finances spiraling. Not all of these benefits may be worth the additional money that you pay for them, but some can help with your finances by relieving you of the need to pay out of pocket for essential expenses. Take the time to evaluate your options so that you get the most from your employee benefits.
