Few things are as stressful as financial problems. In fact, money worries can have a way of taking over our entire lives and making mountains out of molehills. It’s safe to say, therefore, that tackling money woes can improve your life as a whole. Of course, improving your finances will entail sacrificing a few things here and there, so it’s best to prepare yourself for such changes. But don’t worry, it’s not as painful as it sounds. Expert financial advisor Kirk G. Meyer explains how.
Take stock of your expenses.
First thing’s first—before you can think of actionable steps to take in improving your financial health, you’ll need to start by taking a step back and assessing your situation as a whole. This will entail taking account of your income, of course. But even more importantly, you will want to take stock of your expenses.
Now, as you take a closer look, you will likely find that your expenses are actually not created equal. You will have fixed expenses (e.g., rent, insurance premiums, car payments), as well as flexible expenses that vary in amount every month, such as utilities, groceries, credit card bills, and the like. Because both kinds of expenses are essentially non-negotiable since you basically need them to live, you must then put your focus on a third kind.
Aptly called discretionary expenses, these are non-essential, personal expenses that you have full control over, such as restaurant meals, movie nights, coffee runs, etc. The fact is, these are expenditures that you can actually do without, and rethinking them will ultimately do wonders for your financial outlook.
Create a budget.
With a clearer picture of your financial situation, you can then start making your adjustments. More often than not, your discretionary expenses will take the brunt as, again, these kinds of expenses are—to put it bluntly—often unimportant. However, this isn’t to say that you have to do without the finer things in life for the foreseeable future. Instead, it only means that you might need to cut down to prioritize your fixed and flexible expenses and, better yet, make it possible for you to build up your savings.
It can be a tall order, which is why it’s very important to create a budget. This will act as a blueprint to keep you on the right track toward your financial goals. You can also keep yourself accountable by religiously tracking your expenses and income. There’s a good number of apps that can help you with that. Moreover, it’s a great way to keep you consistent, as well as see what changes are working and what aren’t.
Shop smart.
Again, there’s no rule against treating yourself every so often. The key is to be smarter with your purchases. These days, shopping has been made so much easier with online shopping, and while this can pose dangers to your bank account, it can also be a godsend—not just for the convenience, but for the savings opportunities that abound.
Lower your mortgage payment
Historically low-interest rates are still making headlines, and now could be a great time to refinance your home. A lower interest rate can help you significantly lower your mortgage rate, especially if you’ve built up a lot of equity. And a lower mortgage payment frees up cash you can put toward your emergency and retirement funds. Talk to a lender to see what mortgage options are available for a refinance, and leave no stone unturned. Note too that it may be worthwhile to “buy down” an interest rate to secure a better payment. Essentially you would pay the lender a fee at closing for a lower rate. Use a mortgage points calculator first, though, to see if it’s really worth it in the long run.
You’re going to have your work really cut out for you as you try to shake off unhealthy spending habits and make your financial future a healthier one. However, with the right plan and a strong will, there’s no question that you can get it done. So keep your eyes on the prize and don’t be led astray because there’s no better payoff than watching your bank account balance rise.
