While life will certainly throw curveballs at you or your business, a sound financial plan is what you need to keep your head above water. Achieving and maintaining financial wellness is a matter of having a sensible strategy and sticking to it even when something unexpected happens. Here are some of the pillars of an effective financial strategy.
Know Your Spending Habits
Before you can even find a way to cut spending, you must know what you are spending your money on in the first place. You should take an inventory to figure out where every penny goes. When you have found where your most frequent expenditures are, you can begin to evaluate where you need to cut back. Sit down with a pen and paper and graph out your entire monthly spending and break it into categories.
The annual studies of Americans’ financial reserves are alarming to say the least. It’s reported that 50–70 percent of Americans couldn’t handle a $500 financial emergency without going into more debt. While it is easier said than done, it is vital to put money away, even a few dollars at a time, to have a small rainy-day fund to fall back on. Even if you only keep $1000 in an account, you’ll be covered when unplanned expenses come up.
Keep Payments Current
To the extent that you are able, make sure that you do not miss a month’s payment on anything. Even if you are only paying the minimum, staying current on your payments enables you to add more debt if you must for whatever reason. It is when you do not make the payments that your credit gets hit and new lenders begin to view you with suspicion.
Pay Debt First
If you somehow come into a financial windfall, consider paying extra down on your debt rather than spending it or even saving it. Once your emergency fund is substantial enough, paying debt can save you from having to get hit with high finance rates every month. Every time you can avoid having to make a payment on high-priced debt, you are essentially adding extra money to your monthly intake. That’s because it is more money that you can keep and less to pay in financing costs.
When it comes to your finances, planning ahead is extremely important. The best financial decisions are made way ahead of time—not in the moment. You never know what financial surprises life will bring. If you avoid flying by the seat of your pants and plan how to manage your money, you can come out ahead.
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