There are few things in life better than having more money than you thought. There is nothing worse than your bank account going into the red too. You think to yourself what happened? Or, how will I pay all my bills on my salary? Knowing how to manage your money is such a valuable skill. Once you get started you may find yourself with more money than you thought. So, how can you make this tool work for you in 2018?
Set your goals:
This step comes before making your budget. That way you can make your budget around your long and short-term goals. You need to figure out what it will take to reach those goals too.
If you want to buy a new home how much are you willing to spend? What size down-payment will you need prior to purchase? There are mortgages out there that don't require a down-payment. However, you would be required to purchase PMI insurance (Private Mortgage Insurance) to qualify for the loan. Try to save up at least a 20% down payment to avoid having to pay PMI insurance.
Look at your investments too. You want things like your 401(k)'s, IRA's or any stocks to be working for you. How much do you want to have when you retire? What amount to you need to invest per month or year to reach that number? Consider switching out your single - company stocks for mutual funds too. This way if a company or two goes under it doesn't wreck your portfolio.
Budget around your goals:
It's your money and you can tell it what to do. Pay yourself first by putting 10%-20% into savings. Figure out what you need for rent/mortgage, food, and utilities, insurance and budget for those things. Then, account for car payments, student loans, credit cards any debts you have into the budget.
Look at what you have left. What can go toward your home down payment fund? What can go toward your investments? Do you need to replenish an emergency fund? Do you have a rainy-day fund should something happen, and you lose some income? How much money can you put aside for enjoyment like eating or going to the movies?
Try to pay down debts quickly:
You don't want to keep debts like student loans, car payments, and credit cards around for long. You want to pay those off as soon as possible because you receive no value out of paying interest. It's just money down the drain so you want to get that problem solved. Once you do you will have that much more money that can go toward a down-payment or investment portfolio.
Examine where every dollar goes each month:
You may be shocked after looking long and hard at last months bank statement. Especially if you are wondering where all your money went by the end of the month. Look at what you spend doing things like eating out frequently? You may be thinking it's just $8 here or $10 there but those small purchases add up fast. Eating out isn't bad unless you are busting your budget each month dining out. Set your limits on your budget. Once you start hacking money drains out of your budget, you'll find you have a lot more to work with each month. You'll feel like you got a raise!
Increase your income to reach your goals:
This does not mean quit your job right now because it doesn't pay enough for your lifestyle. But, if you have a good chunk of credit card debt or a large car payment consider a side-hustle to increase your income temporarily pay down those debts. Of course, it's always constructive to research the average income for a person in your industry. If you are being underpaid it's time for a raise or time to get your feelers out into the job market.
Sticking to your budget requires self-discipline. That self-discipline is what will help you reach your long-term goals. 2018 will be here soon so what better time to turn a new leaf and grow your wealth.