While you go out each day searching for ways to earn a living and better your life, it’s important you think of how to organize your finances. Whether you juggle three jobs, earn a small salary, or struggle with multiple debts, managing your finances will ensure that you remain financially accountable. It'll also ensure that your finances don't spiral out of control.
Of course, getting your finances in order can be a hassle, especially if you don’t know what habits to stop and what to double down on. Lucky for you, we have the perfect tips to help manage your finances and boost your chances of enjoying a life of financial freedom.
1. Cut Down Monthly Bills
One of the best ways to get your spiraling finances in order is by reducing your monthly expenses. What do your monthly expenses look like? Pitiful or commendable?
Do you spend on irrelevant things like expensive dinners, gadgets, or luxury vacations? Having hefty monthly expenses can drain your finances faster than you realize. So if you observe that your spending habit may be driving you to debt or, worse, bankruptcy, ensure you do something about it.
Trimming your monthly bills will help you manage your finances. And while it may be impossible to reduce certain fixed expenses, like rent or car payments, without altering your lifestyle, you can cut down on variable expenses, like clothing or entertainment, by spending wisely.
2. Settle your debt
Debts can be a double-edged sword. While it often comes in handy when dealing with financial issues or huge expenses, racking lots of debts, especially high-interest credit card debts, can affect your finances.
What does your debt portfolio look like? Does it make you cringe or smile? If it is the former, you may want to figure out how to pay them off ASAP.
And how do you do that?
We recommend that you start by listing all your current debts. Afterward, determine the minimum amount you owe to stay current with each one. Of course, paying the minimum amount of your debts won't eradicate them fast. So you'll have to figure out how to cut down on some of your expenses so that you can direct more money towards your debt repayment.
Additionally, you can ask your issuer to reduce the interest rate on your debt. You can also consolidate multiple debts into one or transfer high-interest debts to a low-interest credit card, like a balance transfer card.
3. Raise your retirement savings
What happens when you stop working? How do you cater to your needs? Without a solid retirement plan, your retirement will be expensive and gloomy. So while you are still working, ensure you start saving for your retirement.
You can consider setting up an RRSP savings plan which boasts tax benefits. Afterward, calculate how much you can contribute using an online payroll calculator. If you are fortunate to have income from multiple sources, the calculator can help estimate how much taxes you owe to the CRA.
For those struggling with debt, focus your effort on increasing your savings. How much you should save depends on how old you are when you start. Of course, if you start saving in your late 20s, you can choose to make small contributions. However, if you start saving late, you may want to save more so that you have enough money in your RRSP account when you retire.
4. Stop using your credit cards.
A credit card is an excellent financial tool when used wisely. With it, you can build your credit and access the money you don't have (in the form of a loan). However, when used carelessly, a credit card can result in lots of debt, which can affect your finances.
If you are fond of using a credit card as a means to make ends meet, you should stop to avoid racking up excessive debts that may prove difficult to settle. Rather than rely solely on your credit card, consider setting up a budget, so you don't have to purchase things on credit.
Alternatively, we recommend switching to cash or debit cards, so you don't accumulate more debt. You can also open a short-term savings account which will come in handy when you want to make large expenses. Of course, implementing these tips may be challenging, but with the right commitment and discipline, it's achievable.
After implementing measures to settle your debts, reduce how you spend, and save money, what next? We suggest you figure out how to make more money. While a typical 9-5 job can make you active income, you may have to determine how to earn passively to boost your finances.
One of the best ways to earn passive income is by investing. Let your money work for you by investing in stocks, bonds, mutual funds, real estate, or other investment vehicles. Ensure you do your research or speak to an investment expert before deciding what to invest in. And if the thought of investing intimidates you, enroll in a class on investing basics. You can also talk to a trusted friend who has experience in investing.
While investing can make you money while you sleep, it comes with risks. So ensure you invest wisely and consider spreading your money in appropriate portions across diverse asset classes to boost your gains and reduce your losses.
6. Use Financial Tools
Thanks to technological advancement, managing your finances is easier. With the help of financial applications, you can organize your income, create a budget, and monitor your spending. Of course, each app comes with different features and uses, so it's best you do your research to determine which is best for your lifestyle and financial needs. Your research should focus on things like
- Fees (charges)
If you aren't sure which financial app is best for you, consider asking for recommendations from family and friends who are conversant with financial apps.
Your health, comfort, and probably happiness are linked to your finances. Once your finances suffer, these things suffer too. So ensure you take the right steps to get your finances in order and boost your quality of life. Plus, you’ll need to be patient, committed, and disciplined if you want to see significant results.