If you think you’re not good at managing money, it might not be an innate flaw at all. Instead, no one ever sat down with you and taught you how to manage your money.
Although your parents probably taught you many things, they may not have got around to giving you sage advice on how to earn more and spend less. Even if you took a Home Economics class in High School, the teacher didn’t mention money.
Sometimes parents mistakenly believe that they should not trouble their innocent children with money matters and high schools believe that a class on how the economy works should be studied in college by Economic or Finance majors.
Although COVID-19 has created an economic crisis around the world, raising an international call for debt relief, it is not the only reason why most people in the United States have such enormous debt. COVID has augmented a problem that existed before because of excessive spending.
Fortunately, it’s never too late to become the person you’ve always wanted to be, and here are a few tips on how to take control of your finances:
Cast Off Your Debt Burden
If you’ve accumulated debt due to spending more than you earn, you’re not alone. And if you’ve been trying to pay it off but fallen behind in your payments, you may have heard of two ways to restructure your debt: new financing and debt consolidation.
By definition, new financing means applying for financing, such as creating a new credit line to pay off all your debts. And by definition, debt consolidation means arranging a repayment plan with a lender to get a loan large enough to pay off all, or most, of your debts.
After paying off your debts to various creditors, you will then make a single payment every month to your lender. So, for example, if you were to get a consolidated loan from a lender like Georgetown Funding you would pay a low-interest debt once a month. What’s more, you would only pay what you could afford after calculating your income and expenses. Once you had agreed on an amount that you could afford, then you would consistently pay every month until you paid your debt off completely.
Think of it: you won’t be driving yourself crazy paying different creditors at different times of the month for different amounts at different interest rates.
Set Realistic Financial Goals
The best way to buy a large ticket item, such as a car, a boat, or a house is to save for it rather than just rely on financing. Even if you can’t save all the money and still need to get financing, you’ll still be able to make a substantial down payment.
One excellent financial goal is to increase how much money you set aside for retirement. Besides regularly adding money to your retirement account, take advantage of your employers’ offer to match your contribution.
If you’re an idealist and set unrealistic goals, you’ll probably get discouraged as you strive to reach them.
While it is possible to save a significant amount of money by saving a large portion of what you earn, following a frugal lifestyle is a tough way to become financially successful. A better plan is to build your wealth through investments.
Investing over the long-term allows you to make passive income. Even when there are gaps in your employment, your stocks, bonds, and mutual funds, or other types of investments will still make money for you.
The major risk in investing is taking unnecessary risks. So while investments can grow your wealth, do it slowly and carefully rather than act as impetuously as a gambler.
Overall, it may be said that money management is an essential life skill, but one you rarely learn when you’re young and impressionable and it’s not a skill you acquire through intuition or experience when you grow up. Although learning how to manage your money may now seem like a missed opportunity, you can always learn how to do it well.