Sometimes life can be difficult. Just when you think you’re getting ahead, an unexpected event sets you back and you’re struggling to make ends meet again. Life can be like that – with a mortgage or apartment payment, the increasing cost of life essentials like food, clothing and fuel. Add important security issues like insurance and healthcare costs, and it’s easy to see why so many people are struggling to save for the future. But one surefire way to save money is to examine how you’re managing your finances and change those things that are keeping you from making the most of every cent.
Set a Spending Limit
There’s no greater danger to your financial future than using all of your income to pay debt and living expenses. If you only do one thing to better manage your money, this is the one – SET A MAXIMUM SPENDING LIMIT with room to spare for savings. By placing a specific cap on the amount of income you will spend each month you will open opportunities to invest for retirement, college or whatever you hope the future will hold. Financial experts suggest a maximum limit of 85% of net income be used for expenses.
Learn How to Budget
The second most important step in better money management is to set a budget. This is essentially taking 85% of your income and creating a plan that shows how it will be spent. Strictly following a budget will teach discipline and help build up savings and investments. Hand-in-hand with following a detailed budget, begin to record expenses and income to help you see where you can cut or eliminate spending.
Limit Use of Credit Cards
Credit cards are not the bad boys that some advisers suggest. In fact, by responsibly using a credit card you can establish credit history that helps raise your credit score; the higher your score is the better the loan and credit offers you’ll receive. Also, having an active credit card is a good security measure in case of emergency.
But there is good reason to limit their use. There’s a serious danger in becoming reliant on credit cards. If you can pay the balance in full when the credit statement arrives, go ahead and use a credit card. Purchases that will cause a balance to be carried over are best postponed until you can pay in full or with cash.
Other Helpful Tips
- Be aware of costly fees for credit cards, debit cards, checking accounts and other financial services. Look for services with low or no fees.
- Search for zero or low interest rates for all your loans; take advantage of 0% credit cards and low introductory APR’s for your existing accounts whenever possible.
- Review your insurance policies. Combining insurance policies, like homeowner, life and car insurance, with one agency will save you hundreds of dollars. Raise the deductible and pay the annual payment in full will also save money.
- Take Advantage of Employer 401(k) matching programs. If your employer matches your contributions to your 401(k) retirement fund, do everything you can to maximize your investments.
- Keep your money out of the pockets of Uncle Sam. Overpaying your taxes and getting a refund from the government is a poor way of managing money. Adjust your withholding to minimize your refund to less than $100. Be sure to save or invest the extra money that will be reflected in your paycheck.
These are only a few of the many ways good money management can help you save money. Please be sure to visit our personal finance blog often for other helpful tips and advice.