Your financial situation now can greatly affect your future. If you are not saving money for retirement or lack an emergency fund, you can end up running into problems later on.
By focusing on the future, you can develop a financial stability that keeps your family secure for the coming years. Here are some tips on how you can become more responsible with your money:
Track Your Spending
Before you can even create a budget, you have to know how much money you’re making and what you’re spending it on. Start by tracking your spending for a month and see how it goes. In most cases, you will be able to find some things that can be cut out.
Entertainment costs, eating out, and other lifestyle habits can quickly add up to hundreds of dollars a month. Keep your receipts and write all of your spendings down. There are also budgeting apps that can help you track your spending habits.
Make a Budget
After you have tracked your spending for a month, the next step is to create a budget. You don’t have to make drastic lifestyle changes to live on a budget, but you can start with minor changes.
Your first goal is to make sure that all of your grocery bills, utility costs, and living expenses are included in your budget. Since unexpected things happen, make sure that you plan for these expenses so you know it’s covered.
To prepare your family for the worst, you need to have an emergency fund that covers at least three to six months of your expenses. If you do not have an emergency fund yet, make sure to include this in your budget.
Over the next few months, start building up your emergency fund whichever way works for you. If you’re injured at work and are eligible for disability, you still want to have money to fall back on just in case. When your car dies or you need a new roof, this emergency fund will help you avoid falling into major debt.
Watch Out for Serious Debt
Getting into debt can happen very quickly, and can take years to get out of. Medical debt is the leading cause of bankruptcy, so one way of avoiding debt is investing in insurance.
If you have dependents to care for, investing in life insurance can also give your family an added level of protection. If you aren’t careful with your money, you can spend years trying to rebuild your credit. The bottom line is, you need to be responsible with your money, so make sure you’re spending it on what truly matters.
Put Saving First
One of the best things that you can do today is to start saving money for your future. Initially, you should focus on an emergency fund–once you have an emergency fund in place, you should start saving for retirement, no matter how old you are.
Because the interest compounds over time, you will have more money for retirement if you save $500 today than if you saved the same amount in 20 years. Plus, some retirement accounts like a 401(k) plan will allow you to deduct your savings from your taxes. If you have financial goals like buying a house, you can also focus on saving for a down payment.
To make saving easier, set up an automatic withdrawal from your bank account or paycheck. Many people initially start with saving 10 percent of their paycheck in a 401(k) plan. Once you are used to this amount, try to work toward 20 percent of your paycheck or more. Everyone is different, so do what works best for you.
Put Your Windfalls to Work
Cutting your budget to save more money might not be easy right now, but there are ways that you can still save painlessly. When you get a sudden windfall like a bonus or tax refund, immediately put that money toward your debts or savings account.
If you get a raise at work, you can apply that extra money toward your monthly savings goals. Instead of using a raise or a sudden windfall to buy a new car, use it to improve your financial situation.
Be Wary of Credit Card Debt
One common misconception is that it is impossible to have good credit without going into debt. In reality, this is not the case. Once you have a credit card, you can pay it off in full each month.
It will still help you develop your credit score, but you will not be dragged down by unnecessary debt. Currently, the average American household has $16,000 in credit card debt. If you can avoid this common pitfall, you can end up better off than the average American.
Avoid Buying a Car or Home You Do Not Need
While you certainly need to be wary of debt, some debts can actually be good. A large purchase like a home or car is often financed through a loan. You can use a loan to make a large purchase, but make sure you are only purchasing a car or home that you actually need.
In most cases, buying a used car or smaller home will be just as good as a more expensive option. The only difference is that you will save money on interest and avoid accruing unmanageable debt.
It Takes Some Time
Managing money is one of the most overlooked aspects of life. With the right approach, your financial skills can help you manage your money better. If you don’t save or budget your money in any way, eventually you will end up broke or living paycheck to paycheck.
Don’t look back and realize you messed up with your money–create a plan and stick with it. It can be stressful trying to manage your money each month, but by following these tips, it will get easier over time.
Susan Ranford is an expert on career coaching, business advice, and workplace rights. She has written for New York Jobs, IAmWire, and ZipJob. In her blogging and writing, she seeks to shed light on issues related to employment, business, and finance to help others understand different industries and find the right job fit for them.