BBB Tips for Taking Control of Your Finances feel a greater sense of accomplishment (the “snowball method”). Use whichever method works best for you. The important thing is to start chipping away at your debt. Also, call your credit card company and ask if they will lower your interest rate. Some lenders will agree, just to keep you from transferring your debt to another lender with better terms. If you shave even a few percentage points off your rate, it can save you thousands and help pay down your balances faster.
Experts are warning that 2023 could be a volatile year for consumers. But every year can be a challenge and setting and sticking to a budget can help you get on the right track to a better financial future. •
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Calculate your income. The first step to creating a budget (consumer.gov/managing-your-money/ making-budget#what-to-know) is to calculate your monthly net income, after taxes, so you know how much you are bringing home. Track your spending. Whether you prefer an app on your phone, computer software, or simply a notebook to jot down your expenses, keeping track of your spending is critical. It helps you see where you are actually spending your money, rather than where you think you are. Use this budget worksheet (consumer. gov/content/make-budget-worksheet) from the Federal Trade Commission to calculate your income and expenses. Categorize your spending. Create categories based on necessities (housing, utilities, food, transportation) and luxuries (entertainment, dining out, travel). If you have credit card balances, student loans, car payments or other debt, make “debt reduction” one of your categories. Set up a budget. Once you have an idea of where you are spending money, you can set up a realistic budget (nerdwallet.com/article/finance/how-to-budget). Many experts recommend following the 50/30/20 rule. Allow 50% of your income for your needs, 30% for wants, and use 20% to pay down debt or save.
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Pay bills on time. Consider online bill-paying that eliminates writing checks, buying stamps, etc. Automatic payments can be scheduled ahead of time and can help you avoid late fees and penalties for missed payments.
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Contribute to your retirement. Make sure you are contributing enough to your 401k plan to get the full matching contribution from your employer. If you get a raise at your job, try to put that extra money aside into your retirement account. You were able to survive on that income for this long, so you won't miss that extra cash, and your retirement account will greatly benefit.
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Save for the big things. Big purchases, such as vacations or holiday gifts for the whole family, can easily blow your budget. Vacations are important and provide a chance to destress, but not if we go into debt for them. Avoid going into debt for these expenditures by saving up ahead of time and only spending what you were able to save. Many banks and credit unions offer savings clubs that might help.
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Choose a budgeting system. Think about your financial goals and personality and select a budgeting system that works best for you. For example, a cashbased system can help curb overspending. A zerobased budget, where you account for every dollar you earn each month, is great for people who love to plan.
Build an emergency fund. Emergencies – car or home repair, unexpected medical expenses, or job loss – can easily throw you off track when it comes to budgeting. Financial experts suggest setting aside an emergency fund for six months of living expenses. If that seems too ambitious, start smaller. Having an emergency fund of even $500 is enough to get you out of many financial scrapes.
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Pay down debt. If you have a credit card or other debts, be sure to include repayment in your budget. One method is to pay off the credit account or loan with the highest interest rate first (the “ladder method”). Another is to pay off the smallest balance first, so you
What we measure and track is key to what we achieve whether it is business goals or individual budgets. Setting and adhering to a solid budget can help you achieve personal financial success and put you in control to meet your goals with less stress.
Content Courtesy of Better Business Bureau
