With the global economy stuck in neutral, you might be worried about whether you’re making prudent financial decisions. The bad news is that you probably have room for improvement, as nobody makes ideal decisions 100-percent of the time. The good news is that you can start making smarter financial decisions more easily than you might expect. Here are three of our best personal finance tips to help you make the most of your income:
Make A Budget
This might seem obvious, but you’d be surprised by how many people waste money simply by not realizing they’re spending it. We recommend writing out every expense you incur for one month, allowing you to easily see where you could trim the fat without adversely affecting your lifestyle. Are you paying for any subscription services you don’t use? Do you need that new sweater, or do you just want it?
One effective way of doing this is to pay cash for everything. Paying cash forces you to make a conscious decision to open your wallet for every purchase decision. This isn’t to say that you can’t splurge (financial experts are generally fine with assigning 30 percent of your income to lifestyle spending), it simply ensures that you splurge on items and experiences that you’ll actually enjoy.
Pay Attention to Interest Rates
What is your monthly APR on your favorite credit card? Your other credit cards? Your student loans? Your savings account? If you don’t know the answers to any of these questions to the second decimal point, you need to rectify that ASAP.
Interest rates determine which loans you should pay off first, how you invest money, and if it’s worth using credit to purchase a big-ticket item like a home or car. If you’re making these decisions blind, it stands to reason that you’re not always making optimal choices.
Set Clear, Attainable Financial Goals
If you’re working with vague financial goals like “I want to buy a house,” you have no way of measuring your progress. It’s fine to have a grand vision, but you should break it into smaller, short-term objectives so that you can give yourself a pat on the back for saving an extra $50 last month or starting an emergency account.
Research also suggests that short-term goals provide more motivation than those that seem impossibly far away, raising the likelihood that you can turn them into reality.
Best personal finance tips can be a complicated topic, but the tips above can help you get the basics down. Do you have any more tips? Feel free to share them below!