Money never comes easily, and unfortunately neither does understanding it. Most people have to deal with financial issues on a daily basis. When you have debts to pay and bills to clear, your savings rate might be quite dismal. There are many strategies you can use to change the trend. Here are a few.
1. Track your spending
To start with, you must understand where the money is going to. There are many online tools you can use to monitor your spending. When you have a snapshot of where you stand financially, it can serve as a powerful gut check. Before you pay for anything, evaluate whether you can afford it or not. Will the purchase bring you closer or push you further from your goals?
2. Use the snowball method to clear debts
If you are into a lot of debt, you ought to prioritize paying them off. Paying debt frees up money for the financial goals you have in place. To kick debt, you may start by paying off your highest interest rate debts first. You can also start by paying off your smaller balances. The former makes more mathematical sense, but the latter (it is known as the snowball method) has been found to be more effective.
3. Work towards a ten percent savings rate
If you are unsure of the amount you should save every month, consider the ten percent rule of thumb. If you can manage to save 10% each month, you will be comfortable knowing that you are living within your means. With time, you can adjust the savings and make a larger payment.
4. Try the no-spend month
Money challenges are fun since they help us gain good financial habits. Jumps start your savings by practicing a no-savings month. It’s simple. All you’ve got to do is to spend on necessities for 30 days. Try using a bike instead of driving. Keep off luxuries too. The exercise will help you to reconsider your expenses and make you a mindful-spender.