Since 2020, people have attributed the decline in their finances to the pandemic. While some have recovered from the financial shock, 44% believe it will take three years to get back on their feet. And unfortunately, many are one paycheck away from ruin. Fortunately, the solution may not be too far-fetched if you currently struggle with your finances. Below is a 3-step guide on what you can do.
1. Learn more about financial literacy
According to 2018 research on this matter, experts discovered that poor financial literacy begins in the teenage years. The report found that 75% of teenagers between the ages of 15 and 19 know very little about personal finance. In many cases, they are aware of saving but lack the necessary skills to see it through. In a further breakdown, the report showed that as these teenagers progressed into adulthood, only 38% took steps to secure their financial future.
Additionally, those who fail to do so often live one paycheck away from poverty. This is a serious issue that needs correction right from the early years. Even though it is better to start early, experts say it is never too late to begin on this path. You can start by learning how to create a budget, manage debt, make judicious use of credit cards, track monthly spending, etc. These essential financial skills will become the tools that enlighten you on making money and getting your earnings to last longer by setting long-term personal savings and investment goals, etc. Even if you believe in the itchy right palm superstition, it is realistic to learn how to make the money that lands in your hands work for you.
2. Prioritize your spending based on your peculiar situation
In turning your personal finances around, one essential thing to do is learn to prioritize your spending. To do this effectively, it would be necessary to categorize your expenses to get a clearer picture. This would mean grouping your expenses into housing, food, taxes, entertainment, debts, subscriptions, utilities, and other expenditures related to your lifestyle. The next step will be to categorize them under urgent and not urgent.
This technique helps you see where your money goes each month and draws your attention to things you can conveniently do without. For instance, entertainment and travel may be kept at a minimum or scrapped altogether until you have enough disposable income. What you must not do is base your financial prioritization on what works for another person. You will have an increased chance of turning your finances around when you identify your particular situation and plan accordingly.
3. Find a new and higher-paying job, if necessary
This has been a significant turning point for individuals looking to turn their finances around for years. For many people who have changed jobs, higher income features in the top three reasons. Indeed, it makes sense to move from a low-paying job to a higher one when you have the requisite skills and experience. The key thing here is to make the move count. This includes setting plans into motion to save a healthy chunk of your higher income. The risk of blowing through your new pay is high if you fail to do this.