Reading about how to improve your personal finances is a start, but it has absolutely no meaning if you don't act on it. Before you can get anywhere with your personal finances, you need to begin right now. So what are the steps you should be taking to get your personal finances in order? Here's a list that you can look at every day, and try to improve your lot. Let's start with getting your banking accounts in order.
1. Pay off all credit card debt
Credit card debt is Enemy No. 1. If credit card bills are not paid off in full every month, there is a huge negative impact. Sit down and work out a plan to pay off any debt that you currently have, using the snowball method that best fits your personality. This has to be top priority.
2. Understand the difference between wants and needs.
To keep your finances in perspective, you need to understand the difference between wants and needs. There is nothing inherently wrong with small luxuries, and you should be able to enjoy the nonessentials in this life. But it is important to realize that wants are not needs. If you master this skill, your finances will be in a much better shape. Critically evaluate your true needs versus your wants. If you are having trouble distinguishing
between them, just eliminate impulse spending.
3. Live on less than what you earn
There are no two ways around this one. If you want to keep your finances in order, you need to live on less money than you make. That would mean either purchasing items and services that cost less than what you currently make, or figuring out a way to increase your salary so that you can spend more (but still less than you make). Either of these is fine. Track your spending and create a budget. If you are spending more than you are making, you need to decide whether to curb unnecessary costs or figure out how to increase income. Most people can balance their budget without changing their current lifestyle.
4. Pay yourself first
Before you pay any bill, you should pay yourself a range of 15% to 30% of your take-home salary. This money is not part of your monthly spending budget. Go to your bank and set it up so that your paycheck is automatically deposited, if possible. Then set it up so that an auto payment is made from your paycheck into a specified account that is not used for monthly expenses.
To Be Continued......
