Having your finances under control is key to living a healthy and fulfilling life.
Bad finances are usually the result of poor financial literacy.
Although getting your finances under control can seem overwhelming, it can actually be easily done by following a few simple, actionable tips.
These 8 simple tips will help you improve your finances today to save money, pay off debt, and build wealth.
Ready to turn your finances around?
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1. Have a budget
Whether you do it on paper, on Google Sheets, or in Excel, having a budget is key to good Personal Finance.
You need to know how much money you make and where your money goes to keep control over your finances.
Unless you have a lot of debt and want to pay it off as quickly as possible, you do not need to budget every penny. The idea is to know how much you spend and how much you can save monthly.
Creating a budget can be overwhelming, especially if you’re bad at personal finance and don’t know where to start.
Should that be the case, don’t worry! I’ve got you covered with this post on how to create your first budget.
This blog post covers each and every step you need to follow to create a budget you will be able to stick to.
2. Start Saving for Financial Emergencies
I will never stress this enough:
The earlier you start saving, the better.
There is no rule on how much you should save. However, there are a few things you need to keep in mind.
First of all, you should consider having 2 different funds.
The first one is an emergency fund. This is a fund you can tap into if you have an unexpected expense.
Many books (including Dave Ramsey’s) recommend having about $1,000 in this fund.
Although saving $1,000 is a great place to start, due to the increased cost of living, it’s no longer enough.
The aim of an emergency fund is to avoid relying on credit cards to pay for unforeseen expenses.
Sadly, $1,000 is no longer enough to cover emergencies.
Saving at least half of a monthly income in an emergency fund before moving to the next point on this list seems more reasonable.
3. Have a Survival Fund
Once you have fully funded your emergency fund, you can start running the numbers for your survival fund.
The aim of a survival fund is to cover living expenses in case you lose your primary source of income.
Again, the amount you put in this fund depends on several factors, including the country you live in (some countries have better social security than others), your monthly expenses, and your income.
It is usually recommended to have the equivalent of at least 6 months of expenses in this fund.
If you live in a country with mandatory unemployment insurance, you should aim to save 2-3 months of expenses in this fund.
4. Spend Less Than You Earn
This one seems like a no-brainer, but you would be surprised by the number of people who ignore this tip.
No matter how much you make, you should always live below your means and avoid lifestyle inflation at all costs.
Just because you make more doesn’t mean you need to spend more. You should actually save and invest more!
This tip will boost your finances and self-esteem.
Think about saving as a long-term reward.
You will sacrifice little things you want for a few minutes or days to get the life you have always wanted.
And it’s completely worth it!
5. Keep Fees as Low as Possible
Having several bank accounts is generally recommended.
This is important if you are not used to carrying cash with you.
I already got my card swallowed by an ATM on a Friday night and can tell you that spending a whole weekend with no money is no fun.
On the same level, having your only e-banking account unavailable because of site maintenance can be annoying if you need to make urgent payments.
If you don’t pay attention to your bank’s fees, they can quickly add up.
To improve your finances, you should aim to keep fees as low as possible.
Compare pricing at different banks to find out which ones have the best rates and open a new account with them or use this information to renegotiate the terms of your contract with your current bank.
6. Consider Refinancing Your Loans
This might seem a bit counterproductive if you are trying to get rid of debt.
However, you should really consider it because it will save you a ton of money.
This is especially true if you took your loan a long time ago.
Your income has probably increased since then. If that’s the case, you can definitely negotiate a better rate!
People don’t know that if they request a loan from several different banks, they can actually negotiate the interest rate that will apply.
Another simple way to save money on interest is to get a loan to pay off your credit card balances if you can’t afford to pay more than the minimum balance.
Credit cards have much higher rates, so taking a loan to pay off your credit card debt totally makes sense when working on your finances.
7. Think About Your Retirement and Start Investing
This will probably be the most important decision you can make for your future.
No matter how young you are, you should start saving in a retirement plan.
The rule of thumb is to save 15% of your monthly income from age 25 to 67. Yes, this is a lot of money.
The good news is that this 15% rate already includes the part paid by your employer.
Starting early is important because it allows you to save more money. It will also give your money enough time to recover from the market’s downturns.
If you start saving for your retirement at age 25, you should save 15% of your monthly income. The rate increases to 18% if you start saving at 30 years old and 23% at age 35!
This seems like a lot of money but remember: according to research, you will need a minimum of $ 1,000,000 to be able to keep up with a normal lifestyle during 20 years of retirement.
And that was before the crazy inflation occurring since 2020.
Again, this number is a minimum, and the amount required to retire serenely can vary significantly depending on many factors (age, health, country, lifestyle…).
So, do yourself a favor and start saving now!
8. Ask for advice
This tip is directly linked to number 7 but applies to other types of investments as well.
You should not be afraid to ask for professional advice. This is really important as investing can be tricky and confusing at first.
Asking for professional advice, even if you have to pay for it, will save you a lot of money in the long run.
The last time I did so was about 5 years ago when I started investing for retirement. Choosing the right plan with the help of a professional advisor helped me save over $30,000 on fees on a 40-year contract.
This is the reason why this tip is probably the most important on this list.
Investing comes with a lot of risks. Asking for professional advice will make your life easier.
No matter your goals in life, having your finances in check is key to helping you live a healthy, well-balanced life.
Finances are such an important aspect of life that you can’t ignore them.
Having healthy finances will offer you plenty of opportunities to improve your life, allowing you to work less, travel the world, and dedicate more time to personal projects.
These 8 simple tips to improve your finances are a great place to start to get your finances in check.
And the good news is that working on your finances does not have to be hard.
With the right tools, you can see significant improvement in your finances in a few weeks only.
Start working on your finances today using the free budget sheets below!