We’re all about smart saving and savvy spending. Since you probably already know our favorite finance tip is to refinance your student loans, here are 6 others to help maintain and manage your finances. These tips are simple, easy to follow and when coupled with a little bit of discipline, effective in providing financial security.
1. Spend Less than You Earn.
This tip is personal finance 101; it’s amazing how quickly living beyond your means develops into serious financial trouble with long-term consequences. With easy access to credit cards, it seems practically effortless to rack up spending that can lead to serious debt. Keep close tabs on your monthly expenses and put the remaining cash away so you can build a cushion for the future. Or if you’re not so disciplined, reverse the order: decide on a set amount of cash to put into savings each month, and then make sure you only spend what’s left in cash.
2. Start (and keep) an Emergency Fund
That car repair cost how much?! Life is filled with the unpredictable; it is more a matter of when, not if, you will experience some sort of financial hardship. Even if you’re single and could move back in with your parents if you lose your job, you still will need cash to break your lease, pay for your phone and car, etc. To protect your credit rating and provide for the unexpected, most experts recommend building an emergency fund equal to three to six months of your normal living expenses.
3. Set a Budget, and Stick with It
With a little bit of formatting, Excel is an easy place to build your budget. Start with exporting all your transactions from the last month. Seeing all that you spent in black and white can be a wakeup call. Haven’t used Excel since freshman year? There are lots of free tools available to help you plan, manage, and stick with your budget.
4. Plan for Major Events
Whether it’s a new car, trip to Europe or starting a family, eventually you will need money for a major purchase or life event. To avoid dipping into your emergency fund, start a separate savings account for things like these. Even if it’s only 1 – 2% of each paycheck put towards your dream vacation or down payment on a new home, this money will grow and be there when you need it.
5. Max Out Any Retirement Matching Offered by Your Employer
Playing golf and doing crosswords all day may seem far away but as all of your relatives remind you, time goes by. Start with the free money – at a minimum, sign up for a payroll deduction just large enough to qualify for the full matching funds offered by your employer. It’s better to eat ramen now than later.
6. Never Carry High Interest Rate Debt.
If you do find yourself in a position with sizable credit card debt, come up with a plan on how you can pay it down over six to twelve months. Assuming you don’t already have too many credit cards, opening a new lower-rate card and completing a balance transfer can have three very positive effects. The first is that many new credit cards come with six to twelve months of free financing, so you can use this time to pay down your debt without accruing more interest. The second is that by opening another card and making consistent payments, you will be improving your credit profile. But the third is probably the most important, and that is that the lower interest rate on your new card will save you money in the future.