Today’s post is contributed by Amy Nickson, a passionate writer on finance. Amy is a professional blogger who has started her own blog and also works as a contributor for the Oak View Law Group. Please share your opinions by commenting below.
Everybody says, declutter your finance to ensure a secure financial future, but nobody says how to do that.
Well, it is true that the simpler your financial life is, the more secure financial future will be.
But, the problem is, finance is one of the most complicated subjects in our life. It is not easy to make it simple. You need to be determined first before simplifying your financial life. Because you may need to follow some ways that can be difficult at the beginning.
Here are 6 ways you can simplify your financial life easily:
1. Consider a frugal lifestyle
Frugal living is the process that helps you to learn live on less. It doesn’t mean that you will have to give up all the luxuries of your life. Frugal living is about getting the maximum value for your money. Being frugal doesn’t mean that you’re depriving yourself, or you have to sacrifice all stuff you like. It is just giving up the impulse buys and trying to lower the expenditures wherever possible. You will also be able to learn how to differentiate between the needs and wants. Often people get into the mindset of impulse buying for pleasure or minimize the stress level. Being a frugal person, you can become a wise spender and will no longer find happiness in impulse buying. This way, you can become a financially responsible person.
2. Cut down multiple credit cards
Credit cards are the convenient tools that can be used to buy things easily. These days, reward credit cards are becoming popular among people. To get bonus points, cash back and rebates, people are now a huge fan of reward credit cards. But, do you know that these reward cards are nothing but marketing gimmicks created by the credit card companies to force people to become impulse buyers?
Thus, it is advisable to cut down multiple credit cards. Use your credit card only when you are sure that you can make the payment within the stipulated time. By doing so, you will be able to avoid accumulating painful credit card debts. Thus, you can move ahead to a peaceful financial life.
3. Use cash as much as possible
Today’s technology makes our life cashless, which is not a bad thing. We are using e-wallet, online banking services, online shopping etc. to make our life more convenient. But going cashless doesn’t mean you can spend money meaninglessly. Sometimes, virtual banking or shopping makes people forget about their affordability. As I said in previous points, people use credit cards randomly without knowing how they can repay the bill on time. Thus, most of the financial experts now recommend people to use cash whenever possible.
Cash plays a vital role to simplify your finances. If you are an impulse buyer, who always fails to stick to the shopping list, then next time carry cash that you would need; doing so, you will not overdo with shopping. Because, when you have a certain amount in your wallet, you know how much to spend. If you can’t resist buying a thing and you see you don’t have enough money in your pocket, you will not be able to buy that. This way, you can stick to the shopping list that you are supposed to do without going spendthrift.
However, it is true that carrying cash is risky to some extent. But, you can use checking account where you can deposit the cash and use whenever you need.
4. Build an emergency fund
Why will your financial life get messed up every time? If I am not wrong, every time when an unexpected emergency came in the past like your son broke his leg, car died, thermostat needed a replacement, you were like “where to get money”. To overcome the situation, either you used your credit cards or took out the costly payday loan.
Thus, you may meet the financial need but you dug the debt hole.
I am not saying that using a credit card for a definite purpose is wrong, but if you don’t make the payments on time, you will be in debt soon, as I said earlier.
Payday loans are more dangerous; they come with high-interest rate and you have to pay back the money after you get your next paycheck. If you don’t, you will be in debt cycle. In addition to this, most of the online payday lenders are tribal or illegal; they can grab your personal information to pull out all the money from your bank account.
Thus, it is advisable to nurture an emergency fund to combat with all the emergencies that come your way. If you lose your job or want to switch a job, the money in your emergency fund will give you a sense of confidence. You don’t need to take out a loan or accrue debt to meet your needs.
However, you should have at least 3-6 months salary in your emergency fund to strengthen your financial backup.
5. Pay off all your debts
Debts are messy and clutter your financial life. Thus, you should pay them off to simplify your financial life. Well, accumulating debt is easier than paying them off. To do so, you have to follow some debt relief strategies. Debt payoff strategies are not simple, you may feel overwhelmed. Thus, it is important to analyze your debt status and income before choosing a debt relief method.
If your life is too stressed out for multiple debts and you need to get rid of them soon, then go for debt consolidation or settlement. However, to do so, you need to have a good income flow.
If you have debts that you can manage yourself without taking help from professional debt relief companies, then you can go for debt avalanche method.
In this method, you need to target the highest interest rate debt first. Make more than the minimum payments toward the highest interest rate debt while making the minimum payments on rest. Continue the process until all the debts are paid off.
By doing so, you don’t need to pay the fees to a third party company to get rid of debts.
6. Save money rigorously
The more money you save, the less financial worry you will have in your life. And the less financial worry, the easier to simplify your financial life.
Thus, financial experts say that you have to save money, since it is important to secure your financial future (like retirement), fund your child’s education, and pay your medical bills.
So, try to lower unnecessary expenditures to save your hard-earned money.
Contribute to a 401(k) account for retirement, open a 529 college savings plan for your child education, and nourish an HSA (Health Savings Account) for medical cost.
- Save money by using coupons.
- Set aside a certain amount from your monthly budget.
- Try to save money on food by using the leftovers to make a new dish and eating at home.
- Save money on gifts by making DIY goodies.
These are all small initiatives that create an effective impact to simplify your financial life. Try them out and let me know how they work.