Most of us don’t really enjoy dealing with finances, but it’s a fact of life. Don’t try to ignore money matters. Instead, a small amount of effort will allow you to organize your finances and reduce some stress and worry from your life.
If you’re like most Americans, you’re working on paying off some debt. It could be student loans, credit cards, car loans, or other types of personal loans.
In order to have the most success at paying off the debt quickly, you should take a strategic approach, and there are a few different options:
Debt Avalanche: The debt avalanche approach involves paying off the highest-interest debt first. You’ll make the minimum monthly payment on all debt except the one with the highest interest rate. Pay as much as you can on that one debt and get it paid off as quickly as possible. Once that debt is eliminated, move on to the one with the next highest interest rate.
Debt Snowball: The debt snowball is also a focused approach, but it pays no attention to interest rate. Instead, you’ll focus on paying off the debt with the smallest balance first. Make the minimum payment on all other debt, and pay as much as possible on the debt with the smallest balance.
The reason the debt snowball can be so effective is that it allows you to get quick wins and see immediate progress. Even if the debts you’re paying off are small, it’s still exciting to eliminate a debt. You’ll see the results of your effort and gain motivation to keep going.
An easy way to organize your debt payoff is to use a debt snowball worksheet. That way you can easily track all of your debts and cross them off as they are eliminated.
Probably the most common financial advice that you’ll receive is to live by a budget. Creating a budget is important, but if you’re not tracking your expenses, how will you know if you are actually sticking to the budget?
Tracking your expenses can be even more effective than creating a budget because you’ll see how you are actually spending money, and you can probably easily identify a few areas for immediate improvement.
There are a few different ways you can go about tracking your expenses. Several of the most popular budgeting apps have expense tracking capabilities. Sometimes it involves linking your credit cards or bank accounts, and sometimes it involves manually entering the expenses.
Another option is to use a simple spreadsheet. Just create columns for the date, amount, item, and category of expense. If you categorize the expenses, you can easily sort to see how much you’re spending in different budget categories.
The last option is to use simple pen and paper to track your expenses. Print a spending log and write down your expenses at the end of each day. You can tally it up at the end of the month to know exactly how much you spent.
Do you ever miss bills because of a lack of organization? This leads to unnecessary late fees and interest charges that you can easily avoid with just a small effort.
Use a simple bill pay checklist to keep track of all of your bills and due dates. You’ll be able to check at any time to see what bills are coming up, or to see if you have already paid a bill.
Try implementing these simple changes into your daily routine and you’ll find that your finances become a lot easier to manage.
Photo courtesy of Pexels.