Mastering your money
One of your goals should be to take control of your money, instead of letting it control you. Here are simple yet effective actions you can take to build a better financial future. Remember that thoughts, hopes and feelings will not bring change. Only action brings change.
STEP 1: Track every penny you spend.
The best way to be aware of how money actually comes and goes in your life (as opposed to how you think it comes and goes) is to keep track of every penny that comes in, and every penny that goes out.
You can use a notebook, your mobile device, money management software, the method doesn't matter, the most important thing is to keep track of your spending habits with a method you will stick to using. Make it a habit. Donít make up the numbers. Record each and every transactions immediately. Most of all, donít judge yourself. Tracking your spending is an exercise in data collection; itís not aimed at changing your habits, yet.
STEP 2: Create a budget
After you have tracked your spending for a few weeks (or months), use the data you collected to develop a budget. According to The Millionaire Next Door, budgeting is one thing that sets the wealthy apart from the rest of us.
Many people fail to budget for a variety of reasons: itís boring, we donít think we need it, or we donít know how. But this simple act can provide a roadmap for your money.
There are a variety of budgeting methods you can choose. We recommend the balanced money formula: 50 percent to needs, 20 percent to savings, and everything else to wants. Simplistic, but effective. Of course, in this senario, you also need a definition of "needs". Needs are things like air, water, food, and shelter. Almost everything else is "want".
Another effective tip is to spend less than you earn! This is the fundamental money skill. Itís common sense, yet many people never learn to do it. Only by spending less than you earn can you hope to build wealth. This is easier to do if you track your spending and develop a budget, but even if you do nothing else, spending less than you earn can put you ahead of your peers.
STEP 3: Optimize your accounts
If your bank is charging a service charge every month, as well as many other fees, and you earn no interest, consider switching banks. Online savings account offer higher interest rates than "brick and mortar" banks, often with no fees. Tangerine is an example, and they often have promotions to earn money if you open an account using an Orange Key (ie. 33628055S1).
Avoid cards that carry an annual fee. Use a rewards credit card. If you have trouble with credit, it is best to avoid them altogether. But if you can use credit responsibly, be sure to choose a credit card that pays you! Find a rewards program that matches your lifestyle. But donít choose a card just because it offers a sign-up bonus or because it gives you a discount at your favorite store. Your goal is to find a useful tool for the long-term.
Call around for a better deal on your home and/or car insurance. Shop around for better mobile phone contracts. Cancel television channels you never watch, or any monthly subscriptions you do not use.
STEP 4: Create an emergency fund
After you have optimized your accounts, make it a priority to save for emergencies. Living paycheck to paycheck can be stressful as it is, but it gets even more so the day something goes wrong.
Open an online high-yield savings account and add $20, $50, or as much as you can afford, to your account every time you get paid. A Tangerine account allows you to schedule automatic deposits, which makes this simple. Money you do not see, is the easiest to save.
STEP 5: Get out of debt
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