12 Smart Ways to Improve Your Personal Finances

ways to improve your personal finances

No matter how young or old you are, it’s always a good idea to spend more time thinking about the way you handle your personal finances. There are so many money myths and traps that could easily lead you astray. For example, maybe you are a recent graduate celebrating with your first pay cheque. It can be tempting to just start buying things like crazy because you consider these things as “rewards” for all the hard work you did both at school, and now at your new job.

However, saving for your future should be your greatest reward for all the hard work you do, but thinking long-term may not be at the forefront of everyone’s mind. If you find yourself struggling with your personal finances, consider these tips to help you improve your personal finances without becoming a miserly penny-pincher.

Stop Lying To Yourself

stop lying to yourselfThis is the first step to improving your finances. A lot of people know deep down that they have trouble managing their income and their expenses, but they try to brush it off by denying the problem. They keep spending, making justifications and generally thinking that they have time to “improve” later on or when they make more money down the line.

The problem is that without recognizing the problem, you won’t be able to address and solve it. The first step is to admit that you have financial issues (even if you’re not in debt, unnecessary spending or heavy reliance on retail therapy are problems, too) and to work towards solving it.

Pay Off Your Debt

There’s a science to this. It’s not just making the payments monthly in a plodding manner. First, you have to identify the card (or the loan) that has the highest interest rate. This is the one making things a lot more difficult for you. Try to prioritize this and pay more than the monthly minimum, if you can.

Remember to pay on time, too, because late payments incur high fees.

As well, if you have owned your home for a few years and the interest rate on your mortgage is higher than mortgage interest rates are today, consider refinancing your mortgage. The benefit to doing this is that you will end up with a lower monthly payment, and then you can apply the difference between what you use to pay and what you are now paying, to pay off any other debt you may have. Curious if this would work for you? Check out the most current refinance rates to see if it would be beneficial for you to refinance.

Live Within Your Means

Spending isn’t always as simple as the act of buying a specific item or service. Within the process are complex emotions and attempts to address said emotions. That’s why a lot of people fall prey to retail shopping. You might be buying a specific item not because you need it, but because you’re in the throes of envy, lust, anger, disappointment, etc.

To prevent excessive spending, create a budget and stick to it.

Pay Yourself First

Most of the time, people leave their savings for last. This means that they pay off everything they need to pay, buy the things they want, and then save whatever is left over. The problem is that there’s rarely anything left to save in such a system.

Instead, pay yourself first. Set aside a certain amount from your salary immediately after receiving it and send it straight to your savings account.

Learn About Investments

You have to educate yourself and learn how to make your money work for you. There are many different types of investments, such as stocks, bonds, real estate, and so on,  and with some research and knowledge, you can choose the one that is best for you.

Set Financial Goals

retired by managing money wellIt can be difficult to focus on saving and improving your finances when you don’t think long term.

One way to motivate yourself to manage your finances well and to stay on track is to think about your long-term goals.

What do you want to achieve? For example, would you like to buy an acreage one day, or would you like to take an around the world cruise?

Perhaps you would like to retire somewhere other than where you currently live and maybe that includes buying a nice condo on the beach. Write down your long term goals and then do some research about them. As you do your research you will become even more excited about them. As well, estimate how much money you need to accomplish each goal and then use your research to try to validate those numbers.

Shop Your Stash

Before you head out and buy new items, go through your closet and see if you have something similar. This phrase was coined by beauty bloggers who advocated “shopping” their stash of makeup first before heading out to the cosmetics stores to buy anything new.

This suggestion will also work well in your kitchen. How many times have you stopped at the grocery store on your way home from work to grab something for dinner because you couldn't remember what you had in your fridge, freezer or pantry?

Next time, shop in your kitchen before you shop at the store.

Use Online Budgeting Tools

Budgeting can be difficult if you don’t know how to get started, so make use of the many budgeting tools available online. These often come with mobile apps, too, so you can stay on top of your finances even while you are on the go.

Don’t Pay Too Much For Insurance

Have you reviewed your insurance contracts lately? Discuss these with your agent, as you might be paying too much for certain riders you don’t need. It’s a good idea to do the review regularly (annually is perfect) so that you can re-negotiate the terms and make sure you’re not paying too much.

Protect Yourself From Identity Theft

Identity theft can destroy your credit rating and prevent you from getting the loans you need. It’s also an uphill battle once you’ve been victimized. It can take years before you regain your footing.

Have An Emergency Fund

Savings are different from emergency funds. This fund is for big unexpected expenses. It’s a good idea to have an amount of money ready in case anything happens.

Set Aside Money For Fun Stuff

You don’t have to deprive yourself; just make sure you keep track of your "fun" spending. Set aside an amount each month for dining out or going out with friends.

One thing to keep in mind is that if you enjoy dining out, make it somewhere you really enjoy. That way you will feel like you had a special treat and hopefully that will see you through until your budget allows you to go out again. As well, by allowing yourself some fun money you won’t be unhappy toiling away without even a bit of opportunity for relaxation and fun from time to time.

Your Turn

Do you pay yourself first or last or never?


    • DC @ Young Adult Money

      DC @ Young Adult Money 06/10/2013 5:13 a.m. #

      These are some really solid tips for improving your personal finances. I love how some things are easy and practical, such as learning about investments and setting financial goals. I definitely am trying to improve my personal finances.

      • Sicorra

        Sicorra 06/10/2013 2:53 p.m. #

        Thanks DC! :-) For some people these tips are easy to follow. I know we are trying to create better habits as well.

    • Brian @ Luke1428

      Brian @ Luke1428 06/10/2013 9:05 a.m. #

      These are great tips Sicorra! We make it a habit to budget money that is set aside for ourselves at the beginning of each month. Don't wait until the end of the month to save. Nothing is usually what is left over like you said.

      • Sicorra

        Sicorra 06/10/2013 3:07 p.m. #

        I agree, rarely will there be a month where money is leftover, so saving needs to be a priority.

    • matteroflifeordebt

      matteroflifeordebt 06/10/2013 9:37 a.m. #

      I love the protect self from identity theft....so important and overlooked.

      • Sicorra

        Sicorra 06/10/2013 3:07 p.m. #

        It is scary how quickly identity theft can happen.

    • Shannon @ The Heavy Purse

      Shannon @ The Heavy Purse 06/10/2013 10:31 a.m. #

      Great tips, Sicorra. I think #1 is so important. It's hard to change behaviors and mindsets when you don't admit there is a problem - even if you're not in debt, as you pointed out. But if you're spending recklessly, you're on a slippery slope and also not likely spending your money on things that really matter - but just because you can. I treat savings just like a bill - automatically paid, no muss, no fuss. :)

      • Sicorra

        Sicorra 06/10/2013 3:11 p.m. #

        Treating savings as a bill is very important. I remember when I read a book about paying yourself first and I thought how can I do that when I have all these other things to pay. But now I understand.

    • krantcents

      krantcents 06/10/2013 10:39 a.m. #

      I learned a long time ago to save for things I wanted. I make savings a priority and set up a payroll deduction for savings. I have done this for 40+ years. It helped me save for the annual expenses such as property taxes, insurance etc. It also helped me reach financial independence in my late thirties.

      • Sicorra

        Sicorra 06/10/2013 3:12 p.m. #

        Payroll deductions for savings is very smart. It is a great way for a person to force themselves to function without that money.

    • Corina Ramos

      Corina Ramos 06/10/2013 11:01 a.m. #

      The one about living within our means, not too many people want to face this issue, especially if it means they'll appear as having less than.

      The one I need to improve on is shopping my stash. There have been so many times when I buy something I already have. It doesn't go to waste around here but it's the money I could have saved...

      Great post Sicorra...this is great advice for folks. Have a great week :)

      • Sicorra

        Sicorra 06/10/2013 3:14 p.m. #

        Exactly Corina, many people want what everyone else has and want everyone to think they can afford it too.

        And I am with you on the grocery stash. I have had countless times where I've bought stuff that I already had.

        Enjoy your week Corina!

    • CelloMom

      CelloMom 06/10/2013 12:45 p.m. #

      Great set of practical tips! You can also save yourself a bundle by not falling for the "You are what you drive" myth: You are not what you drive, you are who you are. Your car is just a box that gets you from A to B. If people choose to judge you by your box, it says more about them than about you.

      • Sicorra

        Sicorra 06/10/2013 3:17 p.m. #

        What a great point! Thanks for bringing that up. Many people do buy expensive cars that they cannot afford just to look cool.

    • Ashley

      Ashley 06/10/2013 11:27 p.m. #

      Amazing post! I think the first point about lying to yourself is especially true among people in their 20's who think they'll have plenty of time to pay for the debt and excuse bad spending with stupid things like YOLO --- loved all of the other tips too. thanks!

      • Sicorra

        Sicorra 06/11/2013 1:30 p.m. #

        Thanks very much Ashley! It seems to be easy to lie to ourselves at any age when it comes to money. And it can become a difficult habit to break.

    • David @my2centopinion

      David @my2centopinion 06/11/2013 11:42 a.m. #

      I know when I first got started studying personal finance I felt like paying yourself first was a very counter intuitive method for getting my finances in order. Once you start doing it, your realize how valuable the skill of saving first really is.

      • Sicorra

        Sicorra 06/11/2013 1:32 p.m. #

        It took me a long time to understand the concept of pay yourself first, but you are right, it is definitely a valuable skill.

    • Jake @ Common Cents Wealth

      Jake @ Common Cents Wealth 06/11/2013 2:18 p.m. #

      These are awesome tips. Thankfully, my wife and I have built into the budget to pay ourselves first. That being said, I need to work on a few others on this list like learning about investments and shopping our stash. We have a tendancy to forget what all we have in our house and then go out and buy something we didn't need to buy.

      • Sicorra

        Sicorra 06/12/2013 10:57 a.m. #

        Congrats on already paying yourselves first. So important.
        I think many of us forget what we have and simply buy more. One example for my husband and I is that we didn't realize that we had 3 new power bars (electric ones) in a closet and at Christmas we bought 2 new ones.

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