5 Shortcuts For Having A Healthier Relationship With Your Money
Having a healthy relationship to money management has nothing to do with your income or wealth. Some people with six-figure incomes struggle to keep up with their bills. Others living on much less take-home pay may be in the habit of setting aside a generous portion of each paycheck for savings. Your approach to running your personal finances actually depends on a host of factors: occupation, lifestyle, learned habits, personality and more.
So, whether you’re facing significant debt or simply want to streamline your family finances, it’s always worthwhile to check in and gauge how you’re handling money management. Here are just five strategies to develop a healthier relationship with your money.
Boost Your Financial Literacy
Your personal finances will reflect, in part, your overall financial literacy. Boosting your overall knowledge of personal finance will allow you to make informed decisions on your own behalf. Start by learning about key concepts that affect consumers like you, such as interest rates. The more general knowledge you acquire, the easier you’ll be able to apply it to your own life.
Set Aside Time for Money Management
Think of this relationship like any other; it’s important to set aside designated time to tend to it each week. Failure to do so will result in you going on “autopilot,” which makes it much easier to lose track of your finances when life inevitably gets busy. As one Forbes contributor writes, “You respect what you inspect.”
Set aside a few hours per week to take a close look at your finances, including your budget, bills and goals. You may choose a recurring time slot like after dinner on one weeknight evening per week. Or, you may take a more flexible approach—provided you trust yourself to sit down and catch up regularly.
Address Outstanding Debts
It’s harder to get ahead when debts, especially significant ones, are weighing you down. A healthy relationship to money requires addressing your outstanding balances—especially those with high-interest rates, like credit card debts.
Start by learning more about popular repayment methods like “snowball” and “avalanche.” The former entails paying the minimum balance on all debts except the smallest, then working your way upward in ascending order. The latter organizes debts by interest rate, so you’ll be paying off your most expensive debts first. Both have unique advantages and disadvantages to consider, but many consumers find success pursuing one of these strategies.
However, debt exceeding $5,000 often calls for a more drastic repayment strategy. For example, some consumers settle their debts with help from a partner like Freedom Debt Relief because creditors may be willing to negotiate on the actual principal amount owed. When negotiated successfully, people can significantly reduce their outstanding credit card balances, which helps kick start the process of achieving relative financial health.
Celebrate Financial Successes
When your nose is to the grindstone, it’s easy to become so focused you forget to take time to applaud successes, big or small. But taking time to celebrate milestones as you pass them is a great way to stay psychologically motivated to continue on your journey toward increasing financial health. Just make sure your celebrations don’t end up derailing your money-related goals.
Grow Your Emergency Fund
Emergencies don’t discriminate. They can strike consumers of any income level or lifestyle at any time. That’s why it’s incredibly important to grow your emergency fund, even as you’re repaying debts or prioritizing retirement. There’s no “magic” number, but experts recommend having at least three months’ worth of living expenses stashed away. Preferably, consumers can save six to nine months’ worth.
These five strategies will help you develop a healthier relationship with your money.