It’s no secret that the cost of living of recent years has been on a near-constant rise. Life is more expensive than it used to be and wages haven’t necessarily risen to match. This means that more and more people are struggling to control their finances.
This doesn’t mean that we’re helpless to watch our money drain away. While it’s difficult, it’s still possible to improve your financial situation and even build up wealth. One of the most important things to have in place is a plan.
If you set financial resolutions for the next year, you’re much more likely to reach them and be in a better position in a year from now.
Financial Triage
The first thing to do is to actually look at your finances and work out where the problems might lie. Look at your bank statements going back about a year and see what patterns are there. Are you regularly spending more than you earn? What are you spending your money on?
Are there ways to improve your income streams? How much are you paying towards debts? Do you have savings that could be put to use getting rid of outstanding debts?
These questions are just a few things you should ask about your finances. Next, you can set a budget and try to cut out things that you don’t need or use such as subscriptions or some luxuries. It might even be worth selling some things or downsizing to get your feet back on good financial ground.
Debt Busting
Next, it’s worth tackling debts. As mentioned earlier, your savings can be a good way to get rid of debt. As a general rule, the interest on loans is much higher than you would earn from your savings, so it’s better to pay off debts before concentrating on your savings.
Rather than only paying the minimum amount each month, try to pay off your debts as quickly as possible. A consolidation loan can help you control your interest rates or, if you can’t get good rates on this kind of loan, try something like the snowball method where you pay off debts one at a time.
Saving and Investing
When you’re debt free, you can think about saving and investing your money. Saving is less risky, but won’t increase your wealth by much unless you use a high-interest account. Investing is more risky and locks away your money, but it can provide you with a passive income and potentially higher profits.
When investing, make sure to look into low-risk investments that might take a while to pay off. Put your dividends into more investments so you can grow your profile over time and eventually have a nest egg.
Some financial apps can help you manage your investments and even use bots to guide where you invest your money. Even if you can only invest small amounts, you will still notice some money trickling into your account.
