Money and the world of personal finance can be so overwhelming to some people that they simply don’t deal with it. While this may not result in you living in poverty, it is certainly not a way to build wealth and is definitely not indicative of healthy financial habits. The truth is, that once you have some financial literacy under your belt, you will feel motivated to make improvements both big and small, and you will really start to enjoy the positive consequences of having paid attention to all your personal money moves. Here are some simple ways to change existing habits and build new ones for a brighter financial future ahead.
Examine Your Debt
Paying down debt is not fun and there is no way around that. However, it is also not an option. If you have borrowed money from any lender at any time in your life you are obligated to return it, plus interest. Interest can be where you get clobbered though. For certain debts you won’t have an option to fiddle with the interest rate to help lower your monthly payments but for things like student loans, you will.
You can refinance private student loans into a new loan as a smart way to lower your monthly payments. This process typically ensures a new interest rate for you which will decrease your total amount paid back over time. This extra money each month can then be allocated towards paying down other debts, contributing to your retirement, or even making additional payments on your student loan. All of which are great examples of how to improve your financial health over time.
Cut Back on Credit
It may look appealing to use your credit cards for everything you buy and earn points or miles or whatever rewards your car offers to you. While this is not a terrible strategy, for someone who’s financial habits aren’t yet fully matured, it is best to keep credit card use to a minimum. When you learn ways to stop using credit cards you will also learn how to make the best use of your cash on hand. This can dramatically improve your habits as a consumer and help you learn impulse control with regards to spending.
Live Below Your Means
There is an old saying that goes just because you can, doesn’t mean you should and this is a great way to think about your money. When you live below your means you are creating cushions of money in places like savings accounts, emergency funds, stock portfolios, and debt repayment instead of overpaying for a car you don’t necessarily need. Buying a home is a great example here. Often you are approved for a loan that is potentially manageable, but larger than what you may need at this stage of life. Instead of shopping at the top of your budget because you want to, think about the advantages of buying a smaller, starter home, and saving that money for down the road when a larger home is more necessary.