Managing finances can be tough, especially if you are unsure about how to go about it. It can almost feel like reading in a foreign language, and quite overwhelming. So, I’ll make it simple with just a few tips. Its important to note,your financial future depends on your ability to save.
Build your Credit
Open a Good Checking Account
Not all checking accounts are the same. Plenty of banks charge fees for things like out of network ATM withdrawals, overdrafts, and falling below a minimum account balance.
The average American pays extra in banking every month. The solution to this is to find a non-traditional bank that offers free accounts. Chime is one online bank that charges almost no fees. Millions of Americans are “unbanked,” meaning they don’t have a bank account at all. In some cases, people have been blacklisted by ChexSystems (a banking reporting system) and can have difficulty finding a bank that will allow them to open an account. Chime doesn’t do a credit check or ChexSystems check on customers so the unbanked may find a home there. If you prefer to do your banking at a physical location, choose a credit union over a bank. A credit union is a not-for-profit organization that serves its members and typically has fewer fees and better interest rates than a bank.
Open Savings Account
Some financial tips are universal, and this is one of them. Open a checking account to store the money you use for your bills and a savings account for the money you’re, the clue is in the name, saving. Saving money is easier when the money you’re meant to be saving isn’t tangible (in your hands)
*Remove the temptation! When you only have a checking account, your money is a little too accessible, a little too tempting. When the money is separated, some of that temptation is removed.
Automate Savings
We all have good intentions when it comes to saving money, but you know what they say about good intentions. You may intend to put some money into savings, but at the end of the month, there’s nothing left to save. This is where automation comes in. Paying yourself first is a pillar of personal finance. Paying yourself is just as important as paying your rent or car payment. With automation, it’s easier to pay yourself first. Set up automatic transfers each payday. Every time you get a paycheck, a certain amount of money goes from your checking account to your savings account. That money is safe before you get a chance to spend it; out of sight, out of mind.
How much money? Enough that it actually has an impact but not so much that you can’t pay your bills with the money left.
Get a Credit Card
Your credit score follows you around for life much like your Social Security number, and having a credit card helps you to build that score. You need a credit score, often a good credit score, to do everything from renting an apartment to buying a car. A credit card is a great way to build your credit but also an excellent way to destroy it. What does using a credit card responsibly mean? Not using it to buy things you can’t afford and paying off the full balance each month. It’s no more complicated than that. If you don’t have a ton of credit history, it can be tough to be approved for a card, but there are credit cards made for such people. When choosing a card, look for one that doesn’t have foreign transaction fees (vital if you travel abroad or buy things online from companies outside the U.S.) or an annual fee. Some cards have annual fees, and in the right circumstances, it can be worth it, but if you’re on a low income, they probably aren’t worth it for you. Ideally, you can get a cashback rewards card which gives you a small percent back on each dollar you spend.
Spending
All of the financial tips in the world won’t help if you spend too much, this applies to both low income and six figure-earners. The bottom line is, how much you spend matters more to your financial health than how much you make.
Create and Stick to a Budget
A budget is essential no matter what your income. Your budget shows you how much money is coming in, how much is going out, and most importantly, where that money is going. Write it down, create a spreadsheet and keep it up to date according to your spending. At the end of the month, you will be able to look at your expenses and really analyze your spending. Go through all of the transactions and see what you can cut. Be strong! We all have spending leaks! (Those things we spend unnecessary monies on…. For me, its Starbucks!) Once you’ve done that, create a budget. I like the 50/30/20 method because it’s simple and works no matter your income. (The 50/30/20 rule is an easy budgeting method that can help you to manage your money effectively, simply and sustainably. The basic rule of thumb is to divide your monthly after-tax income into three spending categories: 50% for needs, 30% for wants and 20% for savings or paying off debt.)
This is make or break!
Creating and sticking to a budget is the foundation of your entire financial life and in many ways, your whole life. You’ll make mistakes but dust yourself off and try again.
Don’t Be Penny Wise and Pound Foolish
Some people do crazy things to save money, like take lots of condiment packages from fast food restaurants instead of buying their own. Or diligently clip coupons to save a dime on toilet paper. But they think nothing of going out to dinner three nights a week or living in a three-bedroom apartment even though they live alone. There is nothing wrong with saving picayune amounts of money on ketchup and toilet paper but saving those small amounts doesn’t have much impact on your net worth (the value of all your assets, minus the total of all liabilities. Put another way, net worth is what is owned minus what is owed) If you want to save real money, it’s the major living expenses you need to keep low.
Find Extra Money
You went through your budget and made cuts, but you can still do better. And you don’t have to do it alone. One website you can try is “Trim”. It’s like having your own financial assistant. The app will go through your transactions, looking for recurring ones. Things like your music streaming service, gym, and dating site memberships. When Trim finds these kinds of transactions, it will message you asking if you want to cancel them. If you do, Trim takes over. You don’t have to make any phone calls or scour a website looking for the “Cancel” option. Using Trim saved me about $70 a month and the service is free!
Don’t Pay for Stuff You Can Get for Free
Chime will give you a free checking and savings account, and you can find a credit card with no annual fee, but that’s only the tip of the iceberg when it comes to not paying for stuff you can get for free. Here are some things you should not be paying for:
~Water: Get a reusable bottle and fill it up when you’re at home or see a water fountain.
~Your Credit Score: You can get a free one at Credit Karma.
~Dates: Well, you can pay for them sometimes, but there are plenty of free, fun date ideas.
~Saturday Nights: Same as for dates. Plenty of free fun to be had on a Saturday night.
~Books: If you like to own your books, I get it, me too. But you can read books for free with a library card. Libraries have all sorts of awesome free stuff, not just books!
~A Financial Advisor: There are some people with such complicated financial situations that it’s worth the expense of hiring a financial advisor, but they’re unnecessary and unaffordable for most people on a low income.
~Cable TV: No one needs cable TV anymore with all of the available streaming services, most of which are far cheaper. This was a tough one for me as a sports fan, but you can find a lot more live sports on streaming services now than even five years ago.
~Lunch at Work: Come on! Buying lunch costs a fortune. Pack up some leftovers. Seriously, you’ll be amazed at the savings. If you don’t like to cook, get a slow cooker. You can make cheap, tasty meals with zero cooking skills in a slow cooker.
For more finance tips visit: https://www.listenmoneymatters.com/24-financial-tips-for-low-income-earners/
