Financial Workout: How to Work Towards a Healthier Bank Balance
In order to set change into motion, it’s a good idea to get a sense of what your financial goals are. Is it getting out of debt? Saving for a home or retirement, a vacation? Set long term goals to establish an end game, as well as the short-term goals that will help you reach the big prize. Revisit smaller goals like putting x amount in savings each month or getting caught up on past due bills on a monthly basis, adjusting if needed.
Don’t Buy What You Don’t Need
Sure, this one may be easier said than done, but it takes a little getting used to. Take inventory of the things you absolutely need to pay for—housing costs, food, household expenses, insurance, etc. —as well as the things you’re buying every month that perhaps you don’t need.
We’re not saying you have to get rid of all the things you enjoy, but don’t necessarily need, this can be more of a matter of making your coffee or tea at home rather than going to a shop each day or committing to cooking dinner more often, exercise at a less expensive gym, or ditch monthly subscriptions you don’t take full advantage of.
Pay Down Debt Before Throwing Dollars into Savings Accounts
While it may feel more rewarding to see your money accumulate, if you’re in debt, the money in your savings account doesn’t really belong to you. Paying down your debts will be better for your financial health in the long run, even if the effects aren’t felt immediately. Your credit score will improve and you’ll be eligible for more options as far as credit cards, car loans and the ability to rent an apartment or secure a mortgage—things that are just as valuable, in some cases more so, than a lump of cash in the bank. Consider getting debt consolidation help from a professional to get a plan in order.
If you’re still not sold, take solace in the fact that most savings accounts don’t accrue much interest anyway.
Make a Rainy Day Fund
Life throws us all sorts of curve balls in the form of unanticipated expenses. An out-of-nowhere job loss or an emergency room visit can wreak havoc on your finances if you’re not careful, as can being ill-prepared for a car accident or anything else. Relying on credit can be a great asset in a pinch, but the end result of using credit for big expenses can lead to mounting debt and lowered credit scores over time.
Photo: 401(K) 2012
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