Short and long term goals are a great way to begin the process of systematizing your finances. It’s important to outline both goal types in order to measure your progress and assess where you want to see yourself in the future. Financial goals don’t have to be anything major — it can be as simple as saving $10 a week!
When setting goals there are a few things you should keep in mind. It is essential to keep these specific and relevant, and to include a way to measure each one effectively. Set a reasonable time to reach it and have milestones to keep them attainable. It’s imperative to realize that you don’t have to keep your goals to yourself, especially if you have a significant other or large family to take care of. Some say that telling another person about your goals will help keep you motivated in trying to complete them and ensure that everyone is on the same page regarding your overall financial status.
Develop a Budgeting Strategy
One of the things you can do to improve your financial well-being is to create a monthly budget and stick to it. Budgeting is a great way to track all your expenses and save money simultaneously. Luckily, there are plenty of tools that can help make budgeting easier, along with excel spreadsheets or something more advanced like a budgeting calculator.
After choosing a method that suits your lifestyle best, lay out your household’s monthly income, which should include your full time jobs and any side hustles you may have. If it helps, use the 50/30/20 rule to keep yourself organized. This rule states that 50% of your monthly income should be spent on essential expenses, such as housing and utility costs. While, 30% of your monthly income should be spent on non-essential items, like entertainment, clothing, or other fun purchases. Keep it mind that 20% of your monthly income should be deposited into a savings account to ensure you’re not spending too much and contributing to your future financial success.
The 50/30/20 rule can help you understand the importance of making sure all your bills are paid on time as well as saving some money for life’s unexpected expenses. Having an emergency fund will help keep the anxieties of those ‘what if?’ moments at bay.
Open a Spending Account
Once you’ve determined the areas in which you can cut down on your spending, it is important to stay on top of it and track your mandatory bills regularly. An easy way to keep track of your spending habits is to open an additional spending account where you can deposit the amount of money that you need to cover all essential purchases each month. By depositing a specific amount into this account, you can stay on track and limit spending on non-essential items. If you choose to open an additional spending account, make sure you take the time to find a financial institution that serves all of your needs.
In a time of social distancing, it has become increasingly important to make sure that your financial institution offers online banking solutions. Depending on what service you use or choose, it can help you regain financial prosperity after a challenging situation, and give you quickly and easily access your financial information from anywhere on your smartphone. Being able to look at your spending account on the go, can help you stick to your budget, by knowing exactly how much money you have to use.
Check Interest Rates and Refinancing Options
After creating a budget, you may find that you are spending a lot of money paying back loans or other debt that you have accrued month over month. Delegate some time to do a little research on your loans and see how much you are spending in interest. Before you get too far into this, make sure that you give your credit score a peek; you can pull a soft credit check online that will give you your score without any dings. Knowing what makes a good credit score and the range it falls into will help give you a better idea of the interest rates you should expect to see. Think of your credit score as your financial report card, the lower your score is the higher your interest rates will be and vice versa. Paying off debts will not only limit your stress but will also help raise your score and allow you to get better interest rates on future loans.
Due to current times, interest rates have decreased significantly and now is the time to determine if you can refinance some of your loans in order to spend less in the long run. Some loans that you can look into refinancing include mortgages, auto loans and private student loans. It is not suggested that you refinance any federal student loans right now since the federal government has lowered the interest rates to 0% and paused mandatory repayment.
Financial health is important at any stage of life, but especially when you become a parent. Having children and starting a family can be a costly endeavor, but with these simple tips, you can make sure that all your bases are covered. Remember it is never too late to take some steps to improve your financial wellbeing.