Are you always seeking ways to improve your financial status? Have you set some measurable financial goals? If not, you may work for decades and have nothing to show for it. Here are eight personal finance hacks you can use to remain disciplined with your finances and build wealth.
If you are on a salary but still struggle to live from paycheck to paycheck, think of ways to boost your income and support the lifestyle you want. You can expand your disposable income by either cutting on your current costs or finding additional earnings. Here are examples: –
- Ask for a raise
- De-clutter your home and sell what you no longer use
- Rent out a room in your home
- Take advantage of your employer-sponsored child care
- Ask for reimbursements for your travel, accommodation, and any other out-of-pocket expenses while on duty
- Claim your tax breaks and any other eligible tax deductions
- Start and monetize a blog, vlog, or website
- Build your new business from home
- Engage in social media marketing
- Create and sell products on Etsy
Develop a budget that captures all your income and spending. Through it, allocate your expenses. You may use the 50/30/20 rule of budgeting. It requires spending 50% of your income on your needs, 30% on your personal desires, and saving the remaining 20%. Then, always compare and streamline your actual spending against the budget.
Aim to live a debt-free lifestyle. If you must take a loan, it should be towards investment in your future. That way, you can increase your savings, have fewer worries about pending payments, widen your financial choices, and work towards your financial security. Typical good debts include student loans, mortgages, real estate, and business ownership.
Bad debts include payday loans, cash advances, credit card debts, and car loans. If you are in debt, prioritize paying off the higher interest debts first. And make most of your purchases on a cash basis.
As mentioned, credit cards are one of the bad debts to avoid. These debts charge high interests that can increase should your credit score rating drop due to an unrelated debt. Also, they attract other numerous fees like annual fees, late payment fees, and balance transfer fees. Unless you can repay the credit card debt in full within a month, avoid it at all costs. Besides, if you struggle with impulse buying, it will worsen when you have a credit card. Here is a list of credit card alternatives you can use: –
- Peer-to-peer loan
- Bank personal loan
- Loan from family and friends
- Collateral loan
- Salary advances
Turn these bad debts into good ones by using them to generate income and increase your overall net worth. For example, a collateral loan can pay for your working capital and help you deliver orders to your customers.
As a rule of thumb, develop lifestyle habits that support your spending less than what you earn. Through it, you build wealth and attain financial freedom. Here are tips to forming a saving culture: –
- Set a realistic saving goal. Then, break this goal into smaller achievable chunks. And reward yourself every time you attain a saving milestone.
- Open an emergency fund. It will come in handy when unforeseen events happen.
- Be disciplined. Stick to your budget.
- Analyze your expenditures. That way, you can identify your fixed expenses and any wastage that you can avoid.
- Pay off any significant debts.
Open and deposit money to a savings account regularly. Use a tax calculator to estimate your tax refund, opting to deposit the majority of it directly into your IRA. And set up a standing order with your bank to deposit funds to a separate savings account on specific dates. These are direct deposits towards your emergency fund and investment accounts. They automate and prioritize your savings. For your bills, set up recurring bank transfers to your utility accounts. Also, use finance apps to automate your budgeting process.
Investments are a form of passive income that you can build and maintain effortlessly. You should develop an investment portfolio that gives you the highest returns and lowest risk possible. The portfolio may have equity, bonds, real estate, private REITs, and retirement plans. However, it is important to research the best investments on platforms such as investing daily review and learn from the experiences of other investors. Also, work with a financial advisor to create your portfolio that will give you regular income even after retirement.
If you are the sole breadwinner, having life insurance will cushion your family from financial distress should you die or become disabled. Likewise, take up medical insurance for your loved ones and pay for any sudden hospitalizations. Other insurance covers include automobile insurance for personal and business vehicles, property insurance, and renters insurance. Then, consult a financial advisor who can assess your risks and suggest the insurance policies for you. Ask the expert to elaborate on the benefits of each cover before committing to them.
Managing your finances is more of a habit than how much you earn. It requires expanding your disposable income, being cautious with your spending, and saving and investing religiously. Develop good money management habits as early as possible in your career. That way, you can handle the pressure when your income sources grow. Finally, seek professional advice to make wise decisions about your hard-earned money.