Here’s a striking reality: did you know that the average American has roughly $38,000 in personal debt? What’s even more alarming about this figure is that this “average” number continues to rise year after year. In fact, debt has become such a common occurrence that it’s likely you know someone who may be dealing with the effects of debt.
So how can you avoid falling into the slippery slope of accumulating debt? The keys to success are planning ahead and financial awareness. Here we’ve outlined 4 tips for managing your finances that can help keep you on track, on budget, and ahead of the debt game.
1) Create a Budget
The first step to staying on top of your finances is knowing your cash flow. This is defined as how much money you have coming in and going out every month.
At the beginning of the month, schedule time to sit down and outline all anticipated expenses and compare that to your expected income for that month. You can easily do this through a monthly budget planner, an excel spreadsheet, a designated phone app, or even good old pen and paper.
By understanding your cash flow, you’ll be able to clearly see how much money you have to work with and then prioritize your monthly spending based on that final number. By sticking to your budget, you will be much less likely to overspend and accumulate debt.
2) Build an Emergency Fund
You’ve probably heard of “saving for a rainy day.” Well, it turns out this famous saying is more than just a catchy phrase, it’s actually an insightful approach for staying out of debt.
A typical scenario for many individuals who find themselves in debt is that they were faced with an unexpected expense or hardship without enough funds available to cover. As a result, that financial expense was likely charged to one or more credit cards.
It’s generally recommended that you save anywhere from 3-6 months of living expenses. However, for the majority of people, this just isn’t the reality. In fact, as of 2017, more than half of Americans had less than $1,000 in their savings account.
If you find that your current savings account isn’t where you’d like to be, don’t be discouraged. There’s always room for growth! The trick is just to start saving, even if it’s only $5.00. By making a conscious decision to put a little money away every month, you’ll have greater peace of mind knowing that you’re prepared. Plus, you may find yourself gaining momentum and motivation in your saving goals as you watch your funds steadily increase. It truly is a win-win!
3) Pay in Cash
In a world where we can conveniently pay with the swipe of a card or tap of our phone, it’s easy to forget the power of paying in cash. If you’re looking to stay on top of your finances, using cash is one well-known trick that works.
When we swipe our cards we consciously know that we’re “spending money,” but we lose that direct connection of physically seeing the money leave our hands and feeling that it’s gone immediately. This disconnect makes it a lot easier to overspend or add additional items to your purchase.
4) Leave Credit Cards Behind
This tip applies for when you know you’re planning a shopping trip for a specific purpose. For example, you need to pick up a birthday gift for a friend’s upcoming party. You have a general idea of what you’d like to get them, and that you want to keep the cost around $50.
Before you head to the mall, do yourself a favor. Pull out all the credit cards from your wallet and place them on the kitchen counter. By leaving your credit cards at home, you’ll eliminate the temptation of spending any additional money on all those promotional sales.
Need Additional Help To Manage Debt?
Tried all of our tips, but still find yourself struggling with debt? Don’t worry! At ACCS, our experienced debt specialists can work with you on strategies to pay off existing debt and to avoid accumulating new debt in the future. Request a custom debt relief plan today!