7 Ways to Improve Your Finances
Being financially secure is a goal that most wish to achieve. Knowing that you can meet all your financial obligations and handle unforeseen expenses is a great feeling and can alleviate a lot of stress in life.
A significant part of managing your finances well is your ability to plan for the future. While you can’t predict every curveball life will throw at you, being prepared, setting goals, and constantly working to better your financial position are crucial steps in the success.
The following seven tips will help you strengthen your financial standing and prepare you for long-term fiscal success.
1. Create a Budget
Budgeting can often feel like a chore, but it's one of the best ways to manage your money and achieve your financial goals. Too often, people only create budgets after facing a financial setback. Yet budgeting is a great tool regardless of your financial situation. It helps you better plan for the long term while incorporating a strategy to help mitigate the effects of unexpected expenses.
How to set up a budget:
- Calculate Your Income. Determine your monthly income after taxes – your take-home pay. Be sure to include any additional income you may have, like child support or freelance work. If your monthly income varies by month, use the lowest monthly income you receive as your base.
- Determine Your Monthly Expenses. How much money do you spend every month? This includes rent/mortgage, utilities, groceries, recreation, eating out, gas, insurance, etc. Include everything you spend money on to make this figure as accurate as possible. If you aren't sure, review two to three months of past account statements to get a better picture of your spending habits.
- Total Your Income & Expenses. Minus your total expenses from your total income. Your income should be higher than your expenses, providing leftover funds you can transfer to your savings monthly. Throughout the budgeting process, look for areas you can cut back – freeing up money to pay down existing debt and increase your savings.
2. Set Financial Goals
You want to know where you’re headed and have a plan for your money. If you’re simply drifting month-to-month or year-to-year without a plan, your money will rarely get you where you eventually want to go.
Setting a goal helps you determine how much you need to save and allows you to visualize the end result - making the process more tangible and increasing your chances of success. Many fiscal achievements, such as buying a home, can take years to complete. While owning a home may not be in your immediate future, planning for it now will make it possible in the years ahead.
3. Start Saving Early
Whether saving for retirement or buying a home, the sooner you begin, the better. Time is your best friend when it comes to investing and saving. Plus, if you start saving early, you can put compound interest to work for you.
How compound interest works:
Imagine you have $5,000 in an account earning 3% APY (Annual Percentage Yield). After 12 months, your $5,000 investment will earn $153 in interest – bringing your total to $5,153.
If you do not touch that money and allow it to keep growing, after two years, the balance will be $5,309. After three years, it will be $5,471, and so on.
Compound interest works best with time. Now assume you invest some of your money into the stock market, where you can earn higher returns, and you add to your savings monthly. The benefits could become significant – especially if you let the account grow for 20 or more years.
4. Create an Emergency Fund
Unfortunately, everyone experiences an unplanned expense sooner or later. Whether an unexpected medical expense or a costly car repair, these surprises can be stressful. Having an emergency fund set up ahead of time prepares you for these events when they occur. Plus, an emergency fund can prevent you from turning to costly alternatives such as payday loans or high-interest credit cards.
Your goal should be to set aside at least three to six months of income. While this may sound like a lot, you want to be prepared for all setbacks, including a potential job loss. Use payroll deduction and automatic transfers to automate the process and build your emergency fund quicker.
5. Build Your Credit Score
Your credit score is one of the most important aspects of your finances. It can help you become approved for loans and pay less interest on the funds you borrow. But it can also help you in other areas of your life, such as renting an apartment, earning discounts on car insurance, and providing you better options for credit cards.
Make building your credit score a top fiscal goal and monitor your progress regularly. You can obtain a free copy of your credit report from the three major credit bureaus (Equifax, TransUnion, & Experian) at www.AnnualCreditReport.com.
6. Limit Big-Ticket Spending
Everyone loves to treat themselves from time to time. People often use purchases to reflect their personality or project their success to the world. But, while all purchases have a price, they also come at a cost.
For example, you could buy a luxury vehicle and spend $750 monthly on your car payment. Or you could buy a more affordable car with a $350 payment and save $400 each month – allowing you to grow your retirement accounts, build your emergency fund, or start a college saving plan for your children.
7. Avoid Borrowing Money
While borrowing money is sometimes inevitable, you should try only to borrow when necessary. When using credit cards, you should always have a plan in place to repay the balance as soon as possible.
Other debt, such as car or home loans, are often times necessary, but you should always avoid overspending. If you're constantly relying on loans to pay your recurring bills, sooner or later, debt will begin to take over your life. If you find yourself living paycheck to paycheck or relying on short-term loans to get by, you're likely living beyond your means. Begin by making a budget as outlined in step one or speak to a credit counselor to find other solutions.
CAMPUS Can Help!
Managing your finances can often feel like a chore and be tricky at times - but stick with it. Little changes in your saving and spending habits can lead to significant improvements in your life.
If you’re ready to strengthen your financial position, we can help. Our team can help you start an emergency fund, find ways to boost your credit score, consolidate loans to save more monthly, and much more. To get started, please stop by any of our convenient service center locations, call 800-367-6440, or visit www.campuscu.com/atms-locations to schedule an appointment.
Other Resources:
On Demand Webinar: Budgeting Basics
Are You Living Beyond Your Means?
By Campus USA at 16 Jun 2022, 17:05 PM