Does your money life seem to be out of control? Many people have a love-hate relationship with money. It’s a necessity, but they’d rather not have to think about it. Maybe your math skills aren’t great, or you just hate staring at numbers. But improving your personal finance skills is something you can do at any point in your life to regain control of your money and build a better future.
1. Learn How to Budget
You’ve probably heard this before. Learning how to budget is one of the most important personal financial skills you need. Once you see how much money is coming in, how much is going out and where it’s going, you’ll know what you need to do to save more money, pay your bills and meet your long-term goals.
If you don’t know how to prepare a budget, no problem. You can download a budget app that sets up your income and expense categories for you. You can also use programs like Quicken or set up a simple spreadsheet. Or check out these 5 classic budgeting methods, “for people who hate budgets, from the personal finance website Firstly.com.
2. Maximize Your Money
Your money is limited. You don’t want to waste it. Savvy consumers commit to a life where they never pay the full price for an item. Always look for sales. Shop around and compare prices. Sharpen your bargaining skills. You can negotiate everything. Just ask! Be prepared to walk out the door if you don’t get the price you want. You can always wait until the item is on sale.
3. You Don’t Need Everything
Learn how to separate need from want. This personal financial skill will save you money. Before you pull out the credit card or cash, ask yourself some serious questions. For instance, Do I really need this? Will this newer version make me more productive? What will happen if I don’t buy this item? Can I still get to work? Will I lose my job? Can I afford this item right now? Do I already have too much debt? Should I avoid this?
4. Delve Into Interest Rates
You want to know everything about interest rates before you sign up for a new credit card or take out a loan. Interest rates impact your total monthly payment — and in the case of variable interest debts, like credit cards, interest rates have a huge role in how quickly your debt will collect compound interest. Over time, compounding interest rates can add more than 100% to the cost of your original purchase. Credit cards usually come with variable interest rates, that will go up and down based on what’s happening in the economy — and trust us, it is seriously important to know the APR of every card you carry.
Several factors go into the interest rate you’re offered. Chief among them your credit score. But it’s also based on the market rate. Once you understand interest rates, you’ll be more empowered to shop around and get the best deal you can.
5. Pay Off Your Credit Card Debt
With well-honed personal finance skills, you’ll know how to pick a debt-reduction strategy that’s going to work for you. For instance, should you pay off the largest balance first, or the accounts with the highest interest rates or pay the smallest balances first? There are good reasons for each of these approaches. Paying off the smallest balance gives you a boost of confidence.
On the other hand, if you’re carrying high-interest rate credit card balances, you might want to get rid of those first. Then you’ll have more money every month to tackle your other debt or put into savings.
The other option to consider is a debt consolidation loan, which will help you bundle up all your debt into a single loan that carries a lower interest rate than your credit cards. If you qualify for a low-rate loan, your savings could be really significant. Consider reaching out to an expert, like the financial consultants at White Mountain Partners, who specialize in debt consolidation loans.
6. Put Your Money to Work for You
Always pay yourself first. Automate your retirement, emergency, and long-term savings contributions. Even a small amount of money going to your emergency savings account each month will save you from going into debt to cover unplanned expenses, like your car breaking down. If you have a 401(k) plan at work, take advantage of it and max out your contributions — especially critical to do if your employer matches any portion of your contributions. That is free money!!
Bottom Line for Personal Finance Skills
Improving your personal finance skills is the best way to gain control over your financial life. Instead of being stressed out, you’ll have peace of mind. Your money will become a tool to help you reach your life goals, instead of a constant source of worry.
If you have debt that aren’t sure how to resolve, then ask for help. Contact White Mountain Partners today for a no-obligation analysis of your debt and solutions that could work for you.