4 Tips for Getting Your Finances in Order
Almost 1 in 3 Australians suffer from serious financial stress, concluded the research from CoreData. Financial stress leads to anti-social behavior, isolation, relationships conflicts, and breakdowns, losing sleep and depression. Feelings of fear, anxiety, and depression are common.
Understanding your financial health and doing something about it is also stressful. But such hard steps are necessary if we wish to create a stable financial situation, one that doesn’t bring fear and commotion.
This is why we collected these tips that can help you get your finances in order.
Do the research
Like in other areas of life, before getting your finances in order, you will need to research them, which isn’t easy, since most of us get stressed when we think about money and personal finance. Here, avoiding stress usually revolves around avoiding dealing with the finances directly – which is certainly not efficient.
Unless you adopt a practical approach to your debts, ongoing expenses and options for dealing with them, you risk creating damaging and dangerous financial habits. Such expensive habits, like going out with friends and losing track of how much you’re spending and where, will quickly deteriorate your financial health. Hence, the only path for you lies in understanding them.
Pay off current debts
Once you save some money, you will need to commit to consolidating and paying off your current debts, including mortgages. Pay at least double the minimum payments including the finance charge every month. Transfer balances to a single card that has low APR in order to keep track of credit card debts.
Again, do the research. Unless you know how to pay your mortgage off in 5 years, you will be paying it off for much longer, not to mention bigger interest that comes with it. Know where the money is going, then find a way to save a bit, and ultimately put all the extras toward your loan that has the biggest interest.
You can also freeze or cancel your other credit cards so you don’t get tempted to use them. Use a debit card or cash whenever possible for all purchases. If there is no cash for it, don’t buy it.
Develop a rainy-day fund
Life strikes us with unexpected emergencies often. Hence, building an emergency fund that has two or three months of income in it is crucial. If you don’t have one, you will have to borrow money – which is never a wise option. However, creating such funds in these hard-financial times can be a difficult thing to do.
For instance, start with saving a few AUDs every week and throwing all your change in a piggy-bank at the end of the day. Low savings like these will add up as time passes. You can even write yourself a check – for $20 or $50 – every time you receive a somewhat bigger paycheck, and send it to your own special bank account. Alternatively, you can take a part of the money out of your savings account and then invest it in a Certificate of Deposit that doesn’t allow early withdrawal.
Build a budget
A healthy budget is the key to good financial health – no other option exists. Unless you keep track of how you’re spending your money, it won’t take much for spending to lose control. Understanding your spending habits will help you determine whether they align with your current personal or financial goals and make it easier to create a budget that bridges that gap.
Keep everything in check. If you have a habit you don’t want to quit, build the budget around it and make sure it balances out with your other purchases. There is no need to deprive yourself of everything that isn’t necessary, like housing, utility bills or food. You just need to be honest with yourself about how your purchasing works, and how much you can spend on a thing that isn’t life-or-death.
For instance, if your social habits are devouring too much of your disposable income, impose a cap on them, and make everyone stick to it. Track the inventory of your income and expenses, and then take a clear look at what you’re spending and where.
In conclusion, remember to save for your long-term goals as well. Retirement, buying a house or a child’s education will be your last savvy financial decision. Even putting little money aside now, can go a long way in the future with compound interest.