12 Strategies To Take Control of Your Finances

The answer to how to take control of your finances can mean different things to different people. For someone in debt, this could mean repaying loans and mortgages and eliminating all forms of debt, including credit cards. It could mean creating a budget and ensuring optimal savings at a steady rate for someone struggling to make ends meet. Likewise, for someone not having enough financial foresight, it could entail investing money in the market to create a source of income for the future.

Taking control of your money is also not only about fixing errors or lapses in judgment. Even if you do not suffer from any of the common financial problems, you can still benefit from taking charge of your finances and ensuring consistency and discipline in financial planning. There are a number of things that can go against you. Right from inflation and recession to losing a job or a loved one, financial blows can come in more ways than one. They can also come at different junctures of life. Therefore, being prepared and in charge of your money can be one of the first steps to take in your journey to secure financial security. Consult with a professional financial advisor who can help you create a customized financial plan based on your financial needs and goals.

If you are wondering how you can get on top of your finances, these 12 strategies can help:

How do I get my finances under control?

You can employ the following strategies to get your finances under control:

1. Create a budget:

The first step in most financial planning guides is often creating a budget. A budget is the foundation of your financial future. If you have a realistic and efficient budget, you are far more likely to achieve financial success and a life of comfort and sufficiency. Creating a budget can start as early as childhood. Children who come up with a budget to use their pocket money or income from part-time jobs are far more likely to excel later in life. However, it is never too late to start.

There are many ways to create a budget, the most popular one being the 50 – 30 – 20 rule. According to this rule, you can allocate 50% of your after-tax income for your essential needs, like rent, gas, food, clothing, education, etc. 30% can be used to fulfill your wants, such as eating out, traveling, buying electronics, etc. These expenses are not essential for your survival but add value to your life in other ways. Finally, the remaining 20% can be used to save and invest for the future. The percentages can remain the same. However, the values can increase as your income grows with age. This way, you will always have enough savings and investments for your needs.

2. Eliminate debt:

High-interest debt can be expensive to have. It also prohibits your future growth. If you wish to improve your finances, you must prioritize paying off your debts and limiting dependence on them for the future. Not all debt is bad. Moreover, not all debt is avoidable. You may have had to take a student loan to put yourself through college. Given the towering real estate rates, a home loan may also be necessary. However, handling them sensibly is essential. Clearing your student debt must be one of the first things you do when you start earning. Student loan interest rates are amongst the highest in the market, so save more in the initial years and settle your dues at the earliest. Avoid using a credit card, as its interest can be an added expense to burden you during this time. In the case of a home loan, save as much as you can for the down payment. This will reduce your loan needs. Moreover, instead of buying a huge house, stick to your basic requirements and pick a home that is easy to maintain and accommodates your needs.

3. Set specific financial goals:

Setting financial goals can help you improve your finances. When you set goals, you clearly see what you want in life. This, in turn, enables you to develop a suitable strategy for it. For instance, if you want to save money for a child’s education, you can start by getting an estimate of the total money you need and the time available to reach your target. You can then set aside an investment budget according to your income and other expenses. Next, pick an instrument that offers a reasonable rate of return.

Direct goals are far more achievable than vague goals. So, be as clear as possible. This will make it easier to track your progress and identify any loopholes along the way.

4. Read and update your financial knowledge:

This is particularly helpful if you lack the required know-how of the savings and investment process. The market is full of instruments that can help you save and invest to meet your goals. However, the absence of sufficient information or interest can come in the way of your growth. Try to read as much as possible about the various options you have. Understand their differences, taxability, growth potential, performance, past returns, and more to make up your mind about the right pick. You can opt for online newsletters from financial advising firms, newspapers, magazines, and more. You can also simply read the newspaper’s financial section to stay up to date. Every company also has a finance division. You can contact the one in your organization to clear any doubts about your company-sponsored stock options or 401ks. 

5. Invest more:

Investing helps your money grow and beat inflation. It also allows you to cater to multiple financial goals that can require a high lump sum. For instance, buying a car can be expensive, and you may not always have enough money. However, if you invest your money, over time, you will be able to create a corpus that can suffice to pay for a car. Investing is essential to cover your emerging needs. It is also vital to build financial security for the future, for example, in retirement, when you would no longer have a salary to depend on. In that case, you can use your investment returns to cover your basic needs, such as healthcare, food, travel, and more. Investing helps secure your future and lets you be financially independent, so you do not have to rely on others for your needs.

6. Get insurance:

Insurance is a must-have to deal with unexpected situations in life. Insurance offers financial protection in a crisis and secures you and your family against liabilities. There are many types of insurance plans that can help you take control of your finances in an emergency. Health insurance can offer financial security against health-related expenses, like illnesses, accidents, annual health check-ups, prescription drugs, doctor’s consultations, dieticians, and more. Health insurance protects your savings and ensures that you do not lose all your money during a medical emergency. The next insurance product that can help you is life insurance. Life insurance enables you to leave a legacy behind for your loved ones. Life insurance provides tax-free money to your nominee in the case of your untimely demise. This money can be used to repay your debts, cover your family’s basic needs, and a lot more. In addition to this, you can also protect your assets and savings by buying renter’s insurance, car insurance, jewelry insurance, and more.

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7. Minimize non-essential expenses:

If you want to improve your finances, you would have to limit your non-essential expenses. These can include anything that you do not necessarily need or does not add value to your life in the long run. Most impulse purchases fall into this category, such as branded clothes or shoes, expensive foods or beverages, and high-priced hotels or experiences. These expenses can be spur-of-the-moment decisions but cause considerable damage to your long-term financial security. One helpful strategy to reduce them can be to think over your choices. If you feel like buying an expensive bag or booking a high-priced hotel for your vacation, curb the urge to make the purchase immediately. Wait for a few days and see if you still want the same thing. In most cases, the urge passes away, and you are able to see and think clearly. Additionally, always look for affordable alternatives and discounts. If you must book a luxury hotel, see if there are other places that offer the same facilities but at a lower cost. Certain websites may also offer discounts on the same hotel and help you lower your expenses.

8. Look for additional income sources:

If you are struggling to cover all your financial needs with one income, try to create another source. You can take up a part-time job if you have the time. There are a lot of different opportunities on the internet that allow you to leverage your skills. Additionally, you can also consider starting a business. For instance, you can sell things online, create a service-based business, etc. Rental income is also a great source of passive income. However, it requires a high investment amount. If you have the budget to invest in it, you can consider buying commercial or residential real estate and put it up for rent.

9. Improve your job skills:

Another effective way to take control of your finances is by increasing your income. The more money you have, the more comfortable your life will be. However, the competition is increasing manifold. Moreover, the older you get, the more you are likely to feel left out in the crowd. Companies can always hire younger people for the same skill sets at a lower price. So, the only way to keep growing is by ensuring that your knowledge and skills are continuously updated. You can take online courses, and talk to industry experts on LinkedIn or within your company to learn or enroll at a university. Every few years, you may have to up-skill yourself. So, be open to the possibility. This can help you with promotions, salary negotiations, and earning bonuses.

10. Use money management apps:

A simple way to take control of your finances can be by downloading relevant money management apps. There are several apps available in the market that can be helpful. You can use your bank’s app to automate savings and investments, broker apps to keep track of your stocks or mutual funds, budgeting apps to monitor your expenses, and more. Most apps are free to use or may charge a nominal fee. Mobile apps can be very beneficial if you struggle to keep an eye on your money.

11. Stay prepared for any eventuality with an emergency fund:

A financial emergency can uproot your life and destroy your savings. Therefore, having an emergency fund is essential. Emergency funds refer to money you keep aside only for emergencies and not your regular use. For instance, you can turn to your emergency fund for your basic needs if you lose your job. Likewise, if there has been flooding damage to your house, an emergency fund can help you with repairs. Emergency funds should be highly liquid and easily accessible so you do not end up wasting time in a crisis. Moreover, it is advised to keep at least six to eight times your monthly salary in an emergency fund at all times. And if you use this money, make sure to replenish it as soon as you can.

12. Hire a financial advisor: 

A financial advisor can be instrumental in improving your financial health. If you are busy with your professional and personal commitments, find it hard to follow market news, or are generally confused about how to get on top of your finances, you can benefit from hiring a professional financial advisor. Financial advisors can help with a number of things, right from budgeting and savings to tax planning, estate planning, investment planning, and more. They can recommend suitable investment instruments based on your age, risk appetite, and goals, such as stocks, bonds, exchange-traded funds, mutual funds, 401ks, individual retirement accounts, health savings accounts, 529 savings accounts, and more. They can streamline a lot of things and bring in more clarity to sort out your finances.

To conclude

Knowing how to take control of your finances is not all that hard as long as you plan well, are disciplined and focused, and do not overspend. Make sure to understand your financial limits and not go beyond your means. Moreover, try to save and invest more often. Make it a priority first to save your money and then spend the remaining, and not the other way around. Moreover, try to be rational with money and keep emotions and biases aside.

And if you need more help, you can always consider hiring a financial advisor who can offer you a professional perspective and help eliminate errors you may make in financial planning. Use the free advisor match service to match with 1-3 advisors suited to meet your financial needs and goals.