If you are struggling to improve your financial health, you are not alone. Studies frequently show how woefully under prepared average families are for sudden emergencies as well as retirement. You may gaze at your credit card bills, mortgages, and student loans, wondering if you can ever pay them off. Much like with physical health, getting more financially fit requires time, persistence, and most importantly, patience. You must be willing to accept the truth about your situation and craft concrete steps toward reducing debt and increasing savings.
If you’re serious about becoming fit financially, here are five simple steps you can take to reduce debt and achieve your dreams.
1. Create a Savings Account and Automated Savings Plan
The first step to financial fitness is to create a small savings fund for emergencies. Even if you just put in $20 per biweekly paycheck, you would have over $500 at the end of the year. While having an extra $500 may not sound like a huge amount of money, it is a start. It provides a small nest egg in case of an emergency. And if you use a money market account promo code to open account with a bank like CITbank.com, then you can earn an initial $100 or more sign up bonus.
Most importantly, it means that if you have an unexpected expense like an urgent auto repair, you needn’t put that expense on a credit card that incurs interest. Instead, you can pull it from your savings thereby beginning the road to saving your money for unexpected expenses instead of incurring additional debt.
2. Check for Hidden Expenses
Are you paying for products and services that you don’t need? For example, are you paying ATM fees to access your own money or are you paying for a recurring video subscription you no longer watch? Review your credit card bills and bank statements. Look for charges that you can eliminate. Challenge yourself to find $50 a month in expenses or bank fees to eliminate right now. If you can do that you can save $600 a year just by not subscribing to services you don’t use. Removing unnecessary expense bloat is key to being able to get rid of debt and improve your financial well-being.
3. Order Your Credit Card Payments
Credit cards usually have exorbitant interest rates. Within credit cards, rates often range from about 12 percent APR to as high as 25-30 percent APR. Look at each of your credit card interest rates and pay the highest interest ones off first. Once you get a card paid off, don’t use it again! If you keep paying the cards off one-by-one, you’ll make a significant dent in your overall debt, and you’ll reduce your most expensive debt. In turn, you pay less interest to banks and more toward the principal.
4. Earn Side Income
It’s often great if you can earn side money to improve your financial health. Think about your talents. If you can cook, paint, write, program, or have any skill set, you can make some extra money on the side. You may also wish to consider taking a part-time job. You can build a blog and host it quite cheaply by using the coupon codes found here.
While working another job may seem stressful, it’s often a great way to build skills and raise your income. Even if you can earn an extra $200 a month, that would be an extra $2,400 a year toward your credit cards or an emergency savings fund.
Having a second income stream can also make it easier to absorb a significant financial setback, such as the loss of a job. Take care not to increase expenses once you get that additional income, however.
5. Make a Budget and Track Your Balance Sheet
Humans are usually best at fixing things that they can measure. You can’t see the positive impact the above steps are making if you aren’t actively tracking your accounts. Download an app or use a website that imports all of your financial data into one place. Use this app to track your balances. Monitor overall trends instead of minute details. Are your debts going down overall? Are your savings balances increasing? At the same time, make a budget and try your best to stick to it. You may not always be perfect, but getting the big picture of what you can and cannot afford is infinitely valuable to ensuring your cash flow is in the black.
The above steps are concrete steps you can start today. Open up a savings account and create an automated savings plan. Look for hidden expenses and prioritize your payments towards highest interest accounts first. Start thinking about different ways you can earn a little bit of extra money. Finally, make a budget and track your account balances. Dedicate time each day to looking at your financial health and reviewing your status.
Remember, these tips are not going to get you rich overnight. However, they allow you to make incremental progress towards the financial freedom you have always desired!