Feeling a bit of a financial pinch? You’re not alone. According to research collected by Bankrate, the average American owes more than $5,000 in credit card debt. And that’s not counting other types of debt, like student loans, personal loans, and lines of credit. True, some debt can be beneficial. Having a car loan to earn a living makes sense, as long as the loan doesn’t strap you. However, many people end up with more debt than they can carry or a paltry bank account from unexpected emergencies.
No matter the reason why you’re in a fiscal rut, you can climb out. And the faster you take steps toward becoming a more successful money manager, the better. If you’re not satisfied with your cash situation now, try these strategies. They’ll help you reduce your financial insecurities and get you on the right economic track.
Does it ever seem like you run out of funds before payday? The problem could be overspending. For the next month, track everything you purchase. To make it easier, use one form of payment, like a debit card. That way, all the buys you’ve made can be seen in one statement from your bank or card issuer. Look over your list for the “little things” that add up. Morning lattes and scones for $8. Candy binges at the gas station at $5 a pop. Occasional fast-food visits totaling $10 apiece. Calculate how much you could save if you reduce these non-essential purchases. You might be surprised at the number. Then, aim to make fewer impulse buys the next month. Over time, you’ll get ahead of your spending because you’ve increased your awareness.
You might not think that you need a household budget, especially if you live alone. Nonetheless, you’ll want to pull one together to help get a handle on your finances. Your budget should include both fixed cost and variable cost items. For instance, rent would be a fixed cost because it’s about the same each month. An electricity bill is more of a variable cost since it goes down the less electricity you use.
Remember to add budget lines for savings and unexpected items. You will also want to put aside money every month to pay off the debt you owe. Try to be as thorough as you can with your budget. When you’re finished, you’ll have a good snapshot of how much you need. If you have other family members living with you, make sure they’re part of this project, too.
Are your credit cards maxed out or nearly at the borrowing limit? Resist the temptation to call your card company to ask for a credit increase. Instead, strive to pay down your debt as fast as you reasonably can. This is where your budget will come in handy because you’ll know how much you have leftover monthly.
Start by paying down your credit cards with the highest interest rates first. This allows you to avoid overpaying in interest fees, which can add up. If possible, pare down the balance on your credit card by paying more than the minimal amount. Just adding another $25 to your monthly payment means you’re paying $300 more per year to get rid of debt.
Most people can scale back on their spending without feeling too much of a pinch. What are some ways you could subtly—or radically—lower your cash outlays? Begin with subscription plans for services you barely (or never) use. Cancel them immediately, and you’ll already be saving money without having to do any heavy lifting.
Other ways to curb spending might be to combine car trips to conserve fuel or become a one-car family. You might be shocked at how many places you can trim a little financial fat. Some people like to cut the cable for a while. Others decide that eating out makes less sense than cooking homemade meals. Every dollar saved can be stored away for a rainy day or spent toward making debt disappear.
Maybe you want to purchase new furniture for your living room. Lucky you: It’s on sale and marked down from $1,500 to $1,200. So it’s worth saving $300 to get a matching sofa, loveseat, and comfy chair, right? Probably not, particularly if you’re in a financial bind. Here’s the truth: You won’t be saving $300 at all. You’ll be spending $1,200 for something you don’t need.
When you’re trying to get in the fiscal clear, you have to be careful with your buying behaviors. Unless you absolutely need something, such as a replacement refrigerator, you must exercise a little self-discipline. Consider that your goal is to get free of economic stress, not to compound it.
Even though you’re experiencing a financial hiccup, you may still have a good (or better) credit score. This may make you a target for family members and friends who need cosigners for loans or leases. I don’t agree to cosign anything, though. You could make matters worse for yourself if they pull out of their agreed-upon commitment. It can be tough to tell someone you care about that you can’t help them right now. However, by getting free from debts, you’ll position yourself to help others later.
As a final suggestion for revving up your money skills, why not join the gig economy? Think about what you like to do or would be willing to do. Maybe you could drive for a rideshare company. Perhaps you could sell cool handcrafted items on Etsy. You could even dip your toes into the eCommerce space by selling some of your pre-owned goods online. Get creative because a hustle could improve your economic standing by bringing in more income.
Here’s the best part about a side job: You don’t have to do it forever. On the other hand, it could turn into something bigger. Who knows? Perhaps your side gig will be the springboard to a career that you never saw coming. Tomorrow’s going to come, whether you’re ready for it or not. Make “Future You” happier (and more relaxed) by taking care of all of today’s fiscal obstacles.