If your finances and budget are spiraling out of control, you might feel overwhelmed, stressed, and hopeless. But don't panic, there are some steps you can take to regain control and get back on track. Here are some tips to help you manage your money better and achieve your financial goals.
The first step is to get a clear picture of your current financial situation. How much do you earn, spend, save, and owe? What are your fixed and variable expenses? What are your income sources and streams? What are your assets and liabilities? You can use tools like spreadsheets, apps, or online calculators to track and organize your financial data. Be honest and realistic with yourself, and don't avoid or ignore any numbers.
The first thing is to get honest about your spending which you can achieve by tracking how you are spending your money, it is said that what gets measured gets done. Once you have a clear picture of how you are spending, you can then make a decision of what to stop spending on or find a more affordable and cost effective alternative. You can start tracking your spending using the simplest free tools like an excel spreadsheet. Remember to track even the smallest spends as they can easily deceive you to think they are negligible amounts.
We can't measure what we don't track. Take the time to go through all your finances - what comes in, what goes out? Which spendings bring you joy, and which ones don't? Are there any recurring bills that could be lower? Do you have the possibility for multiple streams of income? Note down every single number you know and you can find.
The next step is to create a budget that reflects your income, expenses, savings, and debt payments. A budget is a plan that helps you allocate your money wisely and efficiently. It also helps you identify and prioritize your needs and wants, and set realistic and achievable goals. You can use the 50/30/20 rule as a guideline, which suggests that you spend 50% of your income on essentials, 30% on discretionary items, and 20% on savings and debt repayment. You can also customize your budget according to your specific situation and preferences.
There are different rules as a guideline, and the trick is to find what works for you. After having analyzed your current spending behaviour, it is good to create a budget. However, in order to stick to this budget, it is important to know your why. Why do you need this budget, and what is your ultimate financial goal? Having this clear for yourself will make it easier to follow through and remain dedicated.
Once you have tracked how you are spending, it is important to put a plan in place on how you will move forward to avoid a repeat scenario. Identify a method that works, most importantly keep it simple to your comfort at the start and advance as you go. For example you can categorize your budget as recurring monthly costs such as utilities, food and other home basics, transport/fuel, savings, mortgage, loans, emergency funds. Be sure to maintain your spending below or within your means. Your budgeting should serve your current situation as you go and purpose to reduce your costs and identify what should be eliminated or managed accordingly.
Creating a budget is the cornerstone of financial stability. It empowers you to understand your spending habits, prioritize expenses, and allocate resources wisely. By establishing clear goals and tracking expenses meticulously, you regain control over your finances and pave the way towards a healthier financial future.
The third step is to cut your expenses as much as possible, especially the ones that are not essential or add value to your life. You can reduce your spending by finding ways to save money on groceries, utilities, transportation, entertainment, subscriptions, memberships, and other categories. You can also negotiate lower rates or fees with your service providers, or switch to cheaper alternatives. You can also sell or donate items that you don't need or use anymore, and declutter your space and mind.
Veo que una alternativa sana es mesclar ítem 2 con 3, dado que planificar una reducción de gasto ya es una forma de ir preparando u ordenando un semi-presupuesto. Importante tener en alerta y controlado donde se gasta la plata y evitar al máximo con superfluos. Caso hay un descontrole es necesario realizar un análisis y encontrar una priorización.
Cutting expenses is a great way to minimize spending, when possible. Put your expenses in different buckets and see how much % of your spendings they are. Perhaps you have certain subscriptions you don't use, old contracts that cost a lot of money, etc. Analyzing this thoroughly and finding better options is a great way to lower your monthly expenses. And my personal favourite: decluttering your space to sell or donate anything that no longer serves you. An organized home is an organized mind :)
The fourth step is to increase your income as much as possible, especially if your expenses exceed your income. You can boost your income by asking for a raise or promotion, finding a side hustle or freelance work, creating a passive income stream, or starting a business. You can also leverage your skills, talents, hobbies, or passions to generate extra cash. You can also look for opportunities to improve your education, training, or certification, and increase your value and marketability.
Nowadays, there are many ways to diversify and increase your income. Different websites allow you to offer your services, and many people earn extra money through social media or investments. Make earning money a new hobby, and learn the skills of increasing your income to have some extra cash!
The fifth step is to pay off your debt as soon as possible, especially the ones that have high interest rates or fees. Debt can be a huge burden on your finances and budget, and can limit your options and opportunities. You can pay off your debt faster by using strategies like the debt snowball or the debt avalanche, which involve paying off the smallest or the highest interest debt first, respectively. You can also consolidate your debt into one loan with a lower interest rate, or negotiate with your creditors for a lower balance or a better payment plan.
The sixth step is to build an emergency fund that can cover at least three to six months of your living expenses. An emergency fund is a safety net that can help you cope with unexpected events or situations that can disrupt your finances and budget, such as job loss, medical bills, car repairs, or natural disasters. You can build your emergency fund by setting aside a portion of your income every month, or by using any extra money that you save or earn. You can also keep your emergency fund in a separate and accessible account, and avoid using it for anything that is not an emergency.
As a rule of thumb, an emergy fund should consist of 3-6 months of your living expenses. This means that no matter what happens, you always have some space and safety to take care of yourself.