Maintaining financial wellness requires a lot of attention to detail, self-control, and timely planning. After all, knowing how to manage money is an acquired skill that many people do not possess. Fortunately, even those who may struggle in this area can rely on some basic tips that could facilitate financial freedom.
Using Budgets
According to financial advisers from Knightsbridge PCS, budgets are one of the most neglected tools that can lead to better spending. The reasons why people tend to overlook them generally revolve around their lack of knowledge. Meaning, the false idea that it is difficult to prepare an efficient budget often discourages individuals from making it. In reality, however, there are no clear-cut guidelines in this area. On the contrary, people can create budgets that are completely customized to their liking. The underlying idea is to cross-reference all upcoming expenses with the positive streams of income.
Set Long-Term Goals
In order to exercise financial literacy, one must know what their ultimate goal with the money is. For instance, saving money for years without any tangible objective is borderline futile. Although goals could arise along the way, which is what often happens, one should set them beforehand. That way, they will be motivated to improve their spending habits as they work towards an ultimate purpose. Not to mention how rewarding it will be to finally achieve something that the person has been chasing for a long time.
Do Not Neglect Minor Expenses
Most households pay very little attention to minuscule expenses that may be repeatedly charged to their accounts. For instance, things like Spotify or Netflix subscriptions are seldom considered when dealing with long-term financial planning. And rightly so. These are, after all, minor costs that only marginally skew someone’s spending patterns.
Nevertheless, it is important to keep every single expense that is incurred on a monthly basis in mind. Doing so helps avoid the surprise effect when the charge is accrued. Additionally, a lot of minor charges can easily accumulate to a hefty sum that cuts into savings.
Pay More Than the Credit Card Balance Minimum
The average household in the United States is estimated to have $8,000 in revolving debt, according to CardRates.com. This means that the weighted average of all liabilities comes out to the aforementioned amount. Well, an easy way to reduce this amount is to begin paying off credit cards with more than just the minimum payment.
Just consider the fact that nearly all banks set their interest rates in a way that ensures a never-ending cycle of payments for those who decide to just cover the bare minimum. So, to reduce the number of payment periods and save money, people should try to pay as much of their credit card debt as possible.
Plan for Taxes
When April comes around, a lot of families are caught blindsided by their tax obligations. For those who work as independent contracts, this issue is even more serious as they have to cover the 15.3-percent self-employment tax. As with budgets, dedicating the necessary time to plan will help sidestep any issues that may arise due to underpaid taxes. After all, the IRS is notorious for never hesitating to charge late fees and interest to any debt owed to them.
Keep an Eye on Your Credit Score
As the most important sign of financial health, everyone should do their best to keep their credit history clean. Meaning, they should avoid spending more than 30 percent of their credit limit and pay outstanding balances on time. Moreover, a consistent spending pattern will help have a high credit score as the reporting agencies prefer to see consistency over random spikes in purchasing. Once again, however, the easiest way to figure out the ins and outs of credit scores is to regularly monitor them. Luckily, there are a plethora of companies that offer free credit reports. So, accessibility will almost never be an issue!
Start Saving Early
Ultimately, Knightsbridge PCS reminds that the best financial advice is to begin saving early. Whether this is done through retirement accounts or other methods of saving is irrelevant. The main goal is to accumulate enough capital that will be equal to or more than two months of someone’s earnings. That way, any unexpected issues such as losing a job or facing a medical emergency will not be financially burdensome.
