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Life can be so hectic that it can be difficult to live intentionally. This is especially true of personal finances. You are so busy tackling oncoming challenges that it can feel impossible to stop, take a deep breath, regroup, and act strategically.
However, doing so will put the reigns back into your hands regarding your financial security. You can start with three simple steps.
Build an Emergency Fund
Spending less than you make takes fortitude, but your financial well-being depends on it. Building an emergency fund begins with a specific goal. Most financial experts recommend that you save at least three months of your required expenses. Sit down and figure out how much you spend on the basics each month, and multiply that by 3.
Required expenses include rent, utilities, insurance payments, car payments, food, child care, and phone payments. If necessary, you can cancel cable, gym memberships, and discretionary spending, so you don’t have to include those things. Set aside as much money as you can each month until you hit your goal.
Pay Off Debt
Paying off your debt is probably the most important step in financial management. This is especially true for consumer debt and student loans. One great way to pay off debt is to pay as much as possible each month on the smallest debt while paying the minimum on the others.
Once the debt is paid, add the amount you were paying on the first debt to the minimum of the next smallest debt until that one is paid off. Keep that strategy going until your debts are paid. Bankruptcy should only be used as a last resort for your debt troubles.
Stick to a Budget
Living within your means is only possible if you create a budget and stick to it. All you need is a piece of paper and a pencil, although there are great online tools and apps available as well. Using your net income, categorize each of your monthly expenses and determine how much money you need for each one.
As you make purchases, subtract the amount from your budget. When the money is gone for that category, your spending should be too. Keeping to a budget takes self-discipline, but it is the best method for accomplishing the two strategies previously mentioned.
You need to know that you can take control of your finances. Just like any good habit, it just takes some discipline until sound financial management becomes second nature. The faster you can control your spending, the quicker you will be able to reach financial security.
Few things feel better than living within your means and saving for a rainy day!
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