Someone once said that your 30s were for fixing the financial mess that you got yourself into in your 20s. While that isn’t necessarily accurate, there is some truth to the fact that you can easily dig yourself into a financial hole in your 20s with student loans, car payments, poor spending habits, and the impulse to buy things you don’t really need with your shiny new line of credit. At Provident Payments, we believe that it’s never too early to start taking care of your finances and setting yourself up for financial freedom. Try these 5 personal finance hacks to live by.
#1 Make a Budget
The most important of these personal finance hacks is to make a budget. Nobody thinks that making a budget is fun, but if you want to reach financial freedom, you need to sit down and look at your spending habits. This doesn’t have to be a grueling spreadsheet or black-book, this can be a simple list where to you write out your expenses and your income then weigh them.
Write out all of your fixed monthly expenses. This should include any bills that don’t fluctuate from month to month. These can include:
∙Any Debt Repayments
Then write out your variable expenses like groceries, utilities, and miscellaneous expenses like entertainment and car maintenance.
#2 Spend Less Than You Earn
Spending less than you earn isn’t so much a personal finance hack as much as it is just sound advice. This should come as a given but sometimes it needs to be said just as a reminder, the only way that you’ll ever have financial freedom is by spending less than you earn. Once you have your budget to look at for reference you will have a better idea of where you are overspending and where you can afford to cut back on.
This also means not going crazy with your credit card and spending more than you’re ready to repay in full that month!
#3 Pay Yourself First
Pay yourself first is an easy concept to understand and it’s even easier to implement. All it means is that as soon as you get paid, you should take a predetermined amount of money and pay yourself as if you were paying a bill. Set that money aside and use it to save or invest. It’s a lot easier to reach your financial goals if you pay yourself first rather than using what is left-over, if anything, at the end of the month.
#4 Use the Snowball Strategy to Pay off Debt
This neat little hack is great for giving yourself a psychological boost that comes from paying off your debts. Essentially, the snowball strategy to paying off debt is this: you spend the same amount of money each month paying off debts regardless of how many accounts you have open. Eventually, you will pay off one balance in full. By continuing to pay the same amount though, you will pay off the next balance faster — and so on and so forth, creating a snowball effect of how fast you pay off your debt.
#5 Have a Rainy Day Fund
In part, financial freedom means that you have enough money to get through unexpected rough patches. This means having enough money squirreled away to pay for a broken appliance or to hold you over while you look for a new job. It’s recommended that you have at least 3 months’ worth of your living expenses saved up in case of an emergency, but it never hurts to have more.