1. Thou Shalt Keep an Up-to-date Budget
The backbone of a strong financial future is having an up-to-date budget. Knowing what your income and expenses are will allow you to allocate money for not just your bills, but your savings and spending. Of all of these financial commandments, it all starts with a budget. A realistic budget will allow you to plan for monthly expenses, as well as upcoming bills such as an annual insurance payment, and it should give you a clear picture of where your money is going each month. There are some really useful budgeting apps available such as Mint, which can help you keep track of your money.
2. Thou Shalt Pay of thy Credit Card
Credit cards are very convenient, but come with outrageous interest rates. Running up the balance on your credit card can leave you struggling just to pay the minimum amount due each month. If you’re only paying the minimum, your chances of getting that card paid off are slim. Your goal should be to enjoy the convenience of a credit card but pay the entire balance off each month, thereby avoiding paying any interest on your credit card.
If you have so much credit card debt that the idea of paying it all off each month is difficult, then start small by paying as much as you can over the minimum payment amount each month on your card. If you have balances on several cards, keep paying the minimum on all of them and focus on paying off one card at a time. When that balance is paid off, move to the next card.
3. Thou Shalt Pay Thyself First
Build your budget around your savings goals. Often at the start of each month, we pay our bills and spend our discretionary income on fun with the intention of saving ‘whatever is left’. The harsh reality is that there is often nothing left! The concept of paying yourself first allows you to save a portion of your income before you pay your bills and then spend what’s left. It places the priority on your savings rather than on your spending money. Treating your savings just like any other bill will allow you to put money towards your retirement or emergency fund on a regular basis. When paying yourself first becomes a habit, your savings will effortlessly accumulate with the added bonus of knowing that, after your bills are paid, your spending money is all for fun!
4. Thou Shalt Set SMART Financial Goals
Once you have your budget in place, set yourself some SMART financial goals. A SMART goal is Specific, Measurable, Achievable, Relevant, and Timely. You can learn how to set a SMART goal here. Your financial goals will change as you become more financially successful. You may strive to pay off your student loans or save a certain amount in your retirement fund, or even save towards a well-earned vacation. By using your budget to set a reasonable goal, your financial success is only a matter of planning the work and working the plan.
5. Thou Shalt Create an Emergency Fund
It is an alarming statistic that 40% of American families are unable to weather a $400 unexpected bill. When you consider that most new kitchen appliances and car repairs are well over $400, it’s easy to see how debt can accumulate. Having an emergency fund can allow you to overcome an unexpected bill without derailing your financial life. You need to create an emergency fund slowly while you don’t need it. We all know that cars need repairs and washing machines break. By accumulating a small amount of money each month in a separate account, you’ll be ready when a financial emergency happens. Include your emergency fund in your budget to help it steadily grow. If you use some or your entire emergency fund, work to replenish it for the next time you need it.
6. Thou Shalt Keep an Eye on thy Credit Score
As your financial stability grows, so should your credit score. Monitor your credit on a regular basis with an app such as Credit Karma and pull your full credit report once a year via freecreditreport.com. If there are errors or a sudden shift in your score, you can get to the bottom of it if you’re watching your score regularly.
Understanding the factors that go into making up your score can also help you to avoid behaviors that will lower it. You can learn more about your credit score here.
7. Thou Shalt Invest in thy Future
Saving for your retirement is essential. The earlier you start, the better off you will be thanks to the magic of compound interest. Saving small amounts in a 401K or Roth IRA when you’re younger means that money has lots of time to earn interest and grow into a significant amount by the time you’re ready to retire. Work this into your budget and be sure to take advantage of any employer match scheme that is offered.
8. Thou Shalt Make it all Automatic
This all sounds like a lot of work! It doesn’t have to be. The easiest way to gain financial success is to make it automatic. Use a free budgeting app like Mint that connects to your accounts so it will update automatically. Open accounts for your emergency and savings funds, then set up a direct deposit each month to these accounts. Small to moderate amounts will accumulate over time and you won’t even miss it once you’ve set up the process.
9. Thou Shalt Educate Thyself
Reading this article is one step in expanding on your financial literacy. There are a number of resources available to explain financial concepts. YouTube, blog posts, and podcasts are easy ways to understand how to gain control of your finances. Take the initiative to learn and grow. It can be as easy as listening to a podcast on your commute or signing up for a financial literacy newsletter to read over with your Saturday morning coffee. As with saving money, a small amount of educational material consumed regularly will have a lasting and accumulative effect.
10. Thou Shalt Seek Help when Needed
Money management can be hard and sometimes overwhelming. If you can’t pay your bills or your credit card debt is out of control, it’s time to seek help. A credit counseling session with a certified counselor can help put you back on the path to financial success. Maybe all you need is help setting up a budget or perhaps you need help to get control over your debts with a Debt Management Plan. Whatever your financial needs, a certified credit counselor can help. Ask for help if you think you need it, there is no reason to feel overwhelmed and alone in this process. You can schedule a call with a credit counselor here.