Do you ever feel that you will never get your debts paid, get a new car, buy a house, or stop living from paycheck to paycheck? If so, you just need these motivational tips for sorting out your finances and saving money.
Everyone knows that to control your finances you should live within a budget. However, there are easier things you can do than living within a budget. One is to cut finance charges.
Reduce Your Interest Rates
Lower interest rates will reduce your monthly payments and free up money for savings. You can learn more about reducing interest rates for credit cards at moneysupermarket. Having that extra money each month will motivate you to put it away because it was money you didn’t have before.
Put Aside Emergency Money
Now that you have money to save, you should bank three to six months’ worth of living expense in case of emergency or a job loss. Additionally, this will stop you from having to live from paycheck to paycheck because you can dip into those funds, providing you replenish them.
Pay Off All Your Debt
The next project is to become debt free. Imagine how liberated you will feel when you no longer have debt. Here’s how to do it:
Let’s say you pay $300 monthly toward your debts, which includes several credit cards and loans. Some payments will be larger than others are, so attack the smaller bills first.
Now that your emergency fund is set up, the money you were setting aside for that can go to your debt. Apply it to the smallest bill each month. Once that debt is paid, apply the money you were setting for emergencies to the next largest bill along with the amount you were paying on your smallest bill.
For example, if you were saving $200 monthly for emergencies and your smallest loan payment is $50 per month, you now pay $250 per month on that small bill. That will eliminate it quickly. After that one is paid, apply the first $200 and the now freed up $50 to the next largest bill. If that bill is $100 per month, you are now paying $350 per month toward it. It will be gone in no time. Quite motivating, isn’t it?
Pay Off Your House
Now that you have all of your other debt paid, you can pay off your house quickly. The newer the loan is, the easier this is to do. Check your loan payment schedule and more specifically, the amortization table. It shows how much interest and principal you pay with each monthly payment. You will notice that in the beginning, very little of the payment will go to the principal because it is mostly interest.
You can beat the system by making next month’s payment at the same time you make the current payment. For example, a monthly house payment of around $530 will only apply about $120 toward the principal in the first month and it is about the same in the second. If you pay an extra $120 in the first month and continue to pay the next month’s principal payment each month, you will pay your house off in 15 years instead of 30 and save over $100,000.
If you are not able to make big strides with any of these tips, take small steps. Get into the habit of saving small sums of money and then increase the amount as you can afford it. Keep at it and eventually you will be debt free and have the lifestyle you desire.