Do These 3 Things Right To Improve Your Finances

Today we have the luxury of information, guidance, and calculation tools at our fingertips. From spreadsheet software that allows you to create custom budgets, to snowball debt calculators that help you forecast your options for paying off debt, taking control of your finances is more accessible than ever before. Here are some tips on how to improve your finances right away:

1. Make a personal budget

A budget is essentially a spending plan, and not necessarily a restrictive spending plan. The first benefit of making a personal budget is that you become aware of your spending habits — not so you can judge yourself for what they are, but so you can get a sense of where you are compared to where you’d like to be.

Budgeting well is a matter of keeping track of your income and expenses in order to monitor your progress toward your goal. It can help you find room for a night out with friends by giving up coffee for a week, and/or get you on track for financial goals as large as a house or early retirement. It’s normal for your budget to function as a living document, meaning you can expect the numbers to change as your lifestyle evolves.

To give yourself parameters for building a budget, consider budgeting strategies like the 50/30/20 rule, where you allocate 50%, 30%, and 20% of your income to needs, wants, and savings, respectively.

A simpler budgeting method is the 80/20 rule, where you allocate 20% of your earnings to savings (with 10-15% going to retirement) and the rest can be spent on anything else. There are countless different budgeting strategies you can experiment with and modify to your liking—stick to the strategy that works for you.

2. Think in terms of buying in bulk

A young adult may assume coffee and avocado toast cause financial strain. But it’s not coffee or avocado toast that’s the problem — it’s how people purchase coffee. Going out to a cafe every single day to spend $3-5 on a cup of coffee (totaling $15-25 for the workweek) as opposed to buying coffee at the supermarket and making it at home every day that week would total closer to $2-5 per week, or much less depending on how long you make it last!

Similarly, when you shop for everyday commodities at the grocery store, pay attention to the unit price. You will usually see a lower price per unit on items that are sold in larger quantities. For example, a gallon of milk might cost $4 and the half-gallon is $2.50. Assuming your household consumes a gallon of milk over the course of the week, it would be cheaper to purchase the gallon at $4 rather than two half gallons at $2.50 each, totaling $5.

Of course, if you only consumed half a gallon of milk or less every week, it wouldn’t make sense to buy milk in bulk. This is why tracking your spending habits with your budget is so useful — you become aware of your spending and consuming habits and that helps you figure out what purchasing decisions make the most sense for you.

3. Manage your debt

With all the extra money you free up with better spending habits, you’ll have more power to pay down debt. The larger payments you can make toward your debt, the faster you can pay it down and the sooner it can go away.

That said, there are often other expenses that can take priority over paying off debt. It’s ultimately up to you to decide how quickly you want to pay off your debt, but the important thing to do is make informed decisions.

If you decide to pay off your debt over the course of five years as opposed to one year, how much more will that cost you? How much faster will you reach your other financial goals if you’re able to find room in your budget to pay off debt faster?

The bottom line

Improving your finances is not necessarily all about restricting your spending — it’s more about building habits that help you align with your goals. Rather than thinking about how you’re spending less for yourself, think in terms of investing more in your future. With the right tools and planning, you may find yourself capable of reaching your goals sooner than you think.