You’ve heard it over and over—these are unprecedented times. However, there will be a time—soon—when we’ll slowly move past merely surviving and actually begin thriving. But how do we get started?
A great starting point is with our budget. If you don’t currently have one, now is the time to make one. If you already have one, it may have taken a hit over the last few months and may need some attention. Remember, it’s not about making huge sweeping gestures—it’s about making small steps in the right direction. Here are some best practice tips to begin moving forward:
- Don’t beat yourself up
No matter what shape your finances are in, there are things you can do to make it better. Start by forgiving past missteps and taking a fresh perspective.
- Cut back
To build a budget that works, you will want to fully understand where your money is going. If your income has been drastically impacted, immediately consider expenses that you can pause or cancel. Then, for the next month or two, track every dollar that comes in and out of your account and make adjustments.
- Make a game plan to pay off debt
There are many strategies to pay off debt—especially for credit cards. These two are probably the easiest to implement and stick to long-term.
- Avalanche method
Focus on paying off the credit card with the highest interest rate first. As you pay off one card, roll the amount you were paying into the card with the next-highest rate.
- Snowball method
Focus on putting as much as you can toward the card with the smallest balance. As you pay off one card, roll the amount you were paying into the card with the next-lowest balance.
- Find room for savings
A truly successful financial strategy includes saving. It can be difficult to save while you’re trying to pay off debt, but it’s essential to maintaining a positive savings balance. Start with something small and then increase the amount when you can.
Budgeting with digital envelopes
One tried and true savings strategy is the envelope system—designate online accounts for a specific purpose—tuition, Hawaii, kitchen renovation, wardrobe, etc. Divvy up extra funds between these digital envelopes. To make it even easier, set up automated transfers instead of doing it manually each month.
As you incorporate these strategies into your plan, you’ll be on your way to financial calm.