Which Approach to Improving Finances Is Right for You?

As with virtually any self-improvement endeavor, there is no right or wrong way. This holds true when you’re trying to brighten your financial situation, although it helps tremendously if you’re doing it for yourself. That is, you’re not trying to, say, cut down on spending or accumulating debt because your spouse or family think you need to. Rather, you’re doing it because you recognize you have a problem or issue and want to change it. You need to find an approach to improving finances that works for you.

Financial self-help books, blogs, and articles abound. With just 15 minutes’ worth of research, you could unearth enough information to overwhelm you for 15 years. So, here are two top approaches, streamlined. Choose the one you think works best for you, or combine and customize them.

Attack Multiple Small Areas

One method is to explore a multitude of areas and find ways to save in as many as possible. For example, if you eat out four times a week, cutting that number down to two could save $30 weekly. Similarly, if you get $5 coffees every morning, you could try switching to a smaller size, a cafe that offers cheaper coffee or get coffee five mornings instead of seven. The savings could be about $40 to $50 a month with the latter idea.

Insurance is another “small” area in which you can save. In fact, it is a good idea to check up on your various insurance plans regularly anyway. Shop around to ensure you’re getting the best deal possible, and don’t be afraid to contact local insurance agencies if you’ve been going primarily through online insurers.

With car insurance alone, you could lower your monthly payment by as much as $50, maybe more. Even if you end up sticking with the same agency, your car is getting older and costs less to replace. Thus, it is fair to ask for lower monthly premiums.

Shopping at secondhand clothing stores, canceling cable TV, buying grocery items only when they are on sale or switching to store-brand items in many categories, and carpooling, biking, or walking instead of driving to save on gas are just a few of the other places where you can think small. Add up all of these amounts, and the savings are big.

Focus on One or Two Big Areas

Another strategy is to prioritize one or two big areas. They could be related to budgeting, saving money, cutting credit card debt, or what have you, but the focus is extremely tight. As an example, say that you want an extra few hundred dollars a month, and you live in a two-bedroom apartment. One of the bedrooms is going unused, after checking rental prices for the neighborhood, you determine that you could rent it out for $800 a month. One big change nets you a nice chunk of money.

If you don’t relish the idea of giving up privacy, there are other ways to end up with $9,600 in 12 months (with the renting example, $800 x 12 = $9,600). You could take on a part-time job, for example, and/or move into a smaller apartment or house.

Combine the Big and the Small

Sometimes, it makes sense to combine big and small approaches. For example, if you don’t watch TV much, then your cable TV subscription is good money you’re just throwing away month after month. Similarly, if you don’t drive much but own an expensive car, you could sell it for, say, a $10,000 profit and use the proceeds to buy a $2,000 car.

Whether you decide to go big or small or somewhere in between, be sure that you know your goal in the first place. Is it to reduce your credit card debt, for instance? Is it to save for a house down payment? Knowing your aim gives you a better idea of how much money you need.

Comments are closed.