6 Easy Steps to Take Control of Your Finances
Updated: Aug 13, 2019
If you find yourself lacking a “rainy day fund” or anything resembling a savings account, you are not alone.
A recent report found that just 46% of Americans have a rainy day fund and 2/3 of the country lack the ability where, if they faced an emergency, they could come up with $1,000.
Similarly, only 29% of Americans have enough savings to last them for six months. Nearly a quarter of the country’s population have nothing saved at all.
You may think building savings is impossible, but it is doable. It just requires a lot of hard work, tough decisions, and cutting back on unnecessary purchases.
When put that way, it doesn't sound like fun, but becoming financially literate is a big step towards a better, more stable financial future.
Regardless of your age or experience, the work ahead can seem tough and overwhelming. You might be a young person on your own for the first time, or you could be middle-aged and settled in your career.
But the good thing about financial literacy is that anybody can do it. There is never a wrong time to begin teaching yourself the valuable tools that will get your savings started.
Here are some tips for beginners to start building that savings and become financially literate.
1. Make a budget
Every website about this top will tell you that making a budget is one of the first moves towards financial literacy and independence. But where to start?
First, decide why you want a budget. Then, take a hard look at your spending habits. Use a calendar to take into account days where there might be extra expenses, such as a friend’s birthday or a holiday.
After that, find out how much your household makes. Then, come up with a list of financial goals for yourself. Decide how much you need to save to meet said goals.
If you're single, you don't need to worry about this tip. But if not, make sure you have a monthly meeting to make sure you and your partner stay on the same page.
Lastly, find a budget that works for you. There are multiple options, from Dave Ramsey’s zero-based budget to the 50-30-20 budget.
If you're tech-savvy or like the idea of an automated, streamlined method to budgeting, check out some popular apps like Mint, You Need A Budget or PocketGuard. Each has its perks and can connect to your bank account to cut back on some of the legwork.
2. Calculate and take note of all of your debt
This is a step that no one wants to do, even if it does mean becoming financially literate.
But writing your debt down will give you extra insight, especially when budgeting. It will help keep you organized when figuring out what needs to be paid first if additional payments are possible, and more.
Focus on paying off loans and other debt with the highest interest rates first so you can avoid paying more over time. And if possible, try to pay it off a little above the minimum amount to curb interest fees.
3. Trim the fat
Trimming the fat, or living below your means (LBYM) is a no-brainer for many, but is easier said than done.
The culture we live in makes it extremely difficult to live below our means. Unfortunately, we live in a consumerist society, and it is impossible to get away from its influence.
But still, it is important to try.
LBYM doesn't mean you have to live like a monk. Instead, make yourself more aware of where your money is going and cut back on unnecessary spending, such as going out to eat.
4. Make Your Own Financial Calendar
Subscriptions and streaming services, car payments, rent, and everything else that takes money from your bank account can pile up and become difficult to remember. Even if you have automatic withdrawal, you might find yourself with unexpected overdraft fees that leave you high and dry.
So, each month, find a calendar that you know you'll use (whether your phone, a dry erase board or a desk calendar) and write down the day and amount of each bill. Doing so will help you track where your money is going and hopefully prevent surprise overdrafts.
5. Make a vision board
Even if you aren't a crafty person, creating a financial vision board is a great way to stay on track to financial literacy. Making your goals even slightly tangible, and seeing them every day will keep you motivated to stick to your budget.
6. Ask yourself if unnecessary spending is worth it
The next time you're grocery shopping, and you feel the urge to buy something that's not on your list (like a candle or ultra-soft blanket), ask yourself if it's really worth it.
Think about your financial goals. Maybe you want to save enough to have a staycation without worrying about making up the cost of taking off work. Perhaps you need a new car.
Whatever your end goal is, remember that the thrill of buying something will wear off and guilt will replace it. Even if it's small purchases like a $5 candle, it adds up quickly.
Unless you really need something, stay true to your goals and work on developing those good spending habits.
Financial Literacy is for Anyone
Financial literacy is a skill not everybody has but is one that anyone can develop. If you want it badly enough, you can achieve your financial goals.
Educate yourself a little bit every day about the ways that people who built their savings succeeded. It may not be easy, but it is worth it.
There are numerous resources online that are free and easily accessible to anyone. Read up on old and new methods to familiarize yourself with ones that best fit your lifestyle and needs. Choosing the right plan will make it easier for you to stick to and promote longevity as you develop your savings.