If there is anything most of us would like to do, it’s to improve our finances. When it comes to this, people often think it’s about earning more. Earning more is the dream of an average person, and in fact, it can make things a lot easier. You will be able to pay for so many bills; you could save more; you could afford some luxury, and so on and so forth. However, earning more should be your goal, but improving your financial health should be your major target. This implies that you should be able to live with and manage what you have while you are still able to take care of your basic needs, have little to no debt, manage debt well, and be a comfortable human. This may sound a little impossible if you feel you are earning too little, and that’s our focus in this blog. We will look at smart tips that can help you improve your finances, irrespective of how little you earn.

The Baby and the Adult Analogy

When a woman gives birth to a new baby, the baby is small, but it has all the parts of the body. An adult has limbs, and so does the baby. As days go by, the baby starts to grow, the little fingers starts to develop into something a little bigger, the gum starts to grow teeth, etc.

Let’s link this to personal finance. A man living in an urban area and a man living in a rural area are both living and breathing; the difference is in what they use, eat, wear, etc. The urban guy probably wears branded clothes, and the rural guy probably wears unbranded clothes; are they both clothed? Absolutely!

Now let’s talk about the first smart tip to improving your finances using the above case study.

Management

Has this happened to you before? When you get your paycheck, you overspend within a week, and whatever you have left is so little that you are able to till survive on it till the next paycheck comes in. Meaning that, most of us spend according to what we have and not according to what we need.

Financial management isn’t just about having a lot of money; it’s about making smart decisions with whatever money you have. It means you use your income to cover your needs. What are your needs? These are things that help you survive and keep you productive. If you don’t know how to differentiate between needs and wants, you will see everything as what you need. You don’t necessarily need a TV, but you need food. You don’t need smoothies, but you need water. Don’t get it wrong; you may need TV and smoothies, but you can do without them. But for how long can you do without food and water?

Financial management is about prioritising expenses that bring you the most value, either by necessity or long-term benefit. Good management involves setting up a system where you track your spending, assess your financial habits, and adjust as needed to keep your finances stable.

In the case study of the urban and rural guys in terms of management, both of them can have an equal level of happiness despite the gap. If the rural guy is able to take care of his needs and doesn’t have serious debt, he probably has a better life than the urban guy, who is living large but has overwhelming debts that need to be settled. One is earning more than the other, but one probably lives above his means, while the other is living within his means and in an environment whose standard of living tallies with his pocket. This will take us to the next tip.

Live Within Your Means

Your income is your means; when you live outside of it, you will be exposed to some inconveniences. You need to see your income as an umbrella that shields you from the rain; the umbrella won’t save you unless you are under it. This is applicable to your finances. If you spend more than you earn, you will not be able to take care of your needs, and you may end up accruing debts.

A new born baby that should be taking milk but being fed potatoes might be at risk of serious digestive problem. In essence, don’t bite more than you can chew. If your salary is a few thousand or a few hundred of dollars, make a budget within that limit.

One of the reasons why people live above their means can include peer pressure, a desire to follow trends, lack of contentment, lack of good financial management skill, etc. You can spend more when you earn more, but pending that time, the rule of thumb is to continue living within your means.

You Must Have an Emergency Fund

Effective financial management also includes preparing for unexpected costs. It’s not just about surviving month to month, but ensuring that emergencies won’t derail your financial stability. One emergency can throw your whole finances into disarray. So, you should always set aside a small portion of your income as savings, even if it’s just a little each time.

Conclusion

Ultimately, the essence of financial management lies in controlling your money flow rather than letting it control you. It’s about making choices that maximise your financial health, regardless of the size of your paycheck. This approach to managing money not only helps in achieving financial stability but also in reaching financial goals without the necessity of earning millions.

If you have overwhelming debt and don’t know what else to do, there is something to do. Perhaps you have tried all you can to get your finances in shape, but it has been proving abortive. Are you in a serious debt cycle and don’t know how to take charge and turn things around? Do not worry, you are not alone. At EmpireOne Credit, we help individuals get a hold of their finances and get rid of debt. Your debt can be reduced by up to 80%, and interest will stop immediately. Call us at (416) 900-2324 to schedule a free consultation. Being debt-free feels good!