Do you ever feel overwhelmed by your finances? If so, you’re not alone. In a previous article, we covered how to assess your financial situation and put together a budget. Here, we’ll explore some practical ways to get your finances in order.
Current events have added a high level of uncertainty to the mix. The sooner you take charge, the better.
Pay down debt
If your aim is to take control of your finances, it’s hard to imagine anything that stands in the way of that quite like debt. That’s why paying it down should be a priority.
Here are a few tips that may help:
- Once you’ve made all your monthly minimum payments, put any extra funds toward the debts with the highest interest rates first. For example, credit cards usually have higher rates than student loans. By tackling your highest interest rates first, you minimize the total amount of interest you’ll pay.
- See where you can cut back on spending. Making your own coffee and canceling subscriptions you don’t use is a good start, but don’t be afraid to get creative and look for ways to save money on necessary purchases. For example, you can take control of your car insurance bill by enrolling in pay-per-mile insurance with Metromile.
- If you have good credit, consider asking your credit card company to lower your rate. Or, apply for a card that offers a 0% introductory APR. This way, more of your money goes toward your principal instead of interest.
Automate your finances
Automating your finances might be scary and may even feel counterintuitive — are you really in control if you’re not taking action yourself?
The answer is yes — you are telling the robots what to do, after all. And in many cases, automating your finances is one of the best decisions you can make. When something is unpleasant, like paying a bill or saving (when you could be spending), sometimes it’s best to put as little thought into it as possible. Enrolling in automatic payments or automatically transferring some of your paycheck into a savings account is especially helpful if you tend to spend whatever’s in your checking account. Out of sight, out of mind.
Just be sure to regularly check up on your accounts so you don’t end up overdrafting. Plus, you’ll want to make sure the robots are actually doing their job.
Save for the future
If you really want control of your financial life, you need to be prepared for the future. This means saving for both emergencies and retirement.
Don’t let fear of what the future holds control your life. While you’ll probably have to sacrifice some of your fun money, saving now is worth the peace of mind knowing you’re covered whenever life happens. Here are a few tips to get started:
Pay yourself first. This basically means transferring a set percentage or dollar amount of your paycheck into a separate account every time you get paid. By socking away money before you get the chance to see it in your checking account, you’ll learn to live off of less — and build a nice rainy day fund in the process. Alternatively, try using an app like Digit, Chime, or Empower, which can help you save money without you having to think about it. A good rule of thumb is to have at least three to six months of living expenses saved for emergencies.
Take advantage of your company match. If your company matches retirement contributions, you should contribute at least the minimum amount required to get their match — otherwise, you’re just losing out on free money! Contributing to a retirement account like a 401(k) or IRA can also help lower your tax obligation, too, so it helps you both today and in the future.
Start! Absent a time machine, the best time to start is now. Time is your friend—just start saving and let compounding returns do the rest.
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Jenna Lee is a content marketer, Oxford comma enthusiast, and cat lover living in the Bay Area.