You don’t need to land a higher-paid job or make huge sacrifices to your lifestyle to improve your finances. There are lots of simple things you can do every day to boost your savings and achieve your financial goals. These tips will help you take control of your finances and manage your money better.
Track your spending
Tracking your spending is a crucial part of managing your money and maintaining healthy finances. You should have a clear understanding of where your money goes each month and how your salary is being spent. This will help you improve your spending habits and identify areas to cut down on your spending.
You can use a free budgeting app to track your spending each month and gain an overview of your finances. CNBC reviewed the most popular expense tracking apps on the market and found the best to be Mint, Goodbudget, and You Need a Budget (UNAB).
Trim your monthly expenses
Reducing your expenses is one of the easiest ways to improve your finances and save more each month. There are likely to be lots of ways to trim your expenses without making big sacrifices – here are three ideas:
- Reduce the number of times you eat out or order takeout and cook at home instead.
- Buy groceries in budget-friendly stores and look for cheaper, store-brand alternatives.
- Exercise at home instead of paying for an expensive gym membership.
You can also use price comparison sites to secure lower prices on ongoing expenses like home and car insurance. For example, Root Insurance can save drivers up to $900 a year on car coverage by basing their insurance quotes on driving behavior rather than demographics like most insurance providers.
Create a monthly budget
You should create a realistic budget based on your take-home salary and your spending habits. Avoid making your budget too restrictive or you risk overspending and becoming demotivated. At the same time, you should adopt responsible spending habits and avoid overspending on unnecessary items.
Most financial advisors recommend spending 50% of your income on essential expenses e.g. rent and utilities, 30% on non-essentials e.g. clothes and meals out, and the remaining 20% should be put into savings or used to pay off debts. Take a look at this article by The Balance for a step-by-step guide to making a personal budget.
Save for big purchases
Loans and credit cards make it easier for people to access financing and pay for major purchases like houses. However, you should try to avoid lending money whenever possible. Instead, save up for big purchases and wait until you have enough cash to pay for the item rather than relying on loans.
Set yourself a savings goal, for instance, you could put $200 aside each month to pay for a $2000 vacation at the end of the year. When you buy upfront, you avoid getting into debt and accumulating interest that could take months or even years to pay back.
Improving your finances can seem like a challenge, but these tips will help you take control of your money and save more each month.