How to Start Getting Your Finances In Order At Any Age
Your money fuels your life, allowing you to live comfortably, have meaningful experiences, and support loved ones. On the flip side, however, you may lack the means to afford certain luxuries and accomplish lifelong goals, like paying for a child’s education, traveling to bucket-list destinations, or simply having a peaceful retirement. This will be about how to start getting your finances in order at any age for those of you that don’t know where to start if you’re 19 or 79, this is for you!
While you may have previously taken a look at your financial picture, your circumstances and even your goals will change and evolve over time. Reviewing your finances on a regular basis enables you to adjust your strategies, review your objectives, and make sure you’re on the right track. If you have yet to take diligent steps to organize your finances, it’s never too late to start.
First things first, it all begins with you actually keeping track of your monthly cash flow and knowing where you’re leaking money, and acting on those insights in order to create a better financial situation in the months to come. Now, you should know your cash flow is not just about checking your bank statement at the beginning of every month – it’s also about tracking your finances throughout the month as well.
Think of it as a game where you’re constantly trying to beat your personal best – the more you save, the higher the score. The less you’re in debt, the better your chances are for a financially-stable future, and so on. To keep an analytical eye on your monthly cash flow, be sure to use an excel sheet or online budgeting software that will give you a clear overview of your net worth, debt, cash flow, and other vital information.
How To Improve Your Finances This Year
In order to improve your life, you will need to improve your money management. Think about your financial troubles and how your life could be different if your financial problems could all just magically disappear!
While several years of poor financial decision-making will definitely not go away in one day, when you start the year on the right track and stick to a good plan, your finances and life will turn around for the better.
These personal finance tips are a great starting point for significantly improving your financial situation. Start by implementing four, five, six, or seven of them and watch your finances improve in ways you have never imagined possible.
Know your financial goals
The very first thing to consider when getting started with managing your finances is your financial goals. We can give you all the quick financial tips you could want, but if you don’t have your goals clearly defined it won’t matter because you won’t know which tips might apply to you and which would send you in the wrong direction.
Do you want to retire early? Do you have debts to pay off? Are you a parent who intends to pay for your kid’s college degree, or are you wondering if that’s even remotely possible? The specifics for how to manage money in your 20s are far different than in your 60s.
Improve Your Credit Score
Most people understand credit scores are important. But they’re probably more vital than you think. An ideal credit score is 750 or above. Those with a credit score below 650 are generally only eligible for subprime loans, which typically carry higher rates. This will affect your purchases when it comes to cars, homes, credit cards, loans, etc. It’s best to get your credit in line while you get your finances in order simultaneously.
Credit scores can also affect more than just a home or auto loan. Even the cellphone offers you get in the mail are targeted to you based on credit score. Some jobs even check credit scores because they have a correlation with someone being responsible. You can check your credit score for free once per year at annualcreditreport.com
Reduce and Abolish Any Debt
This is probably the most difficult step in the process but it’s crucial to get your finances inline. You have to consolidate or pay down your debt. Legal Zoom recommends that you at least double the minimum payment plus the finance charge every month. You should also transfer balances to one or two cards with low APRs to help track your credit card debt. Destroy or freeze your other credit cards and use cash or debit cards for all of your purchases.
Pro tip to remember: If you don’t have the cash on hand, don’t buy it.
Save More Money
If you are the average millennial saving 7 percent of your income, you will need to increase this to 10-20 percent if you want to maintain your current level of consumption in retirement. Start cutting back on unnecessary expenses. Stop throwing away your money on rampant consumerism.
Many billionaires are frugal and do not buy new cars and gadgets until the old ones wear out. $50 a week saved today and put into savings bonds with a 4% interest rate will be worth over a quarter million dollars in 40 years when you are ready to retire. Play with different scenarios with the Goal Savings calculator.
Ensure you have an emergency fund of at least 3 to 6 months’ salary in case of an accident, illness, or job loss.
Celebrate your financial successes
Downsizing and restricting your lifestyle can bring down morale. Recognizing small successes is a good way to keep morale up and momentum going. You’ll take many small steps as you get your finances in order. Celebrate them! This is another good reason to share your financial situation with your family—you can share the successes, too.