Over 55% of Americans carry credit balances each month instead of paying their total balances. Debt is one of the major roadblocks of personal finance success.
If you want to regain control of your finances and improve your financial position in 2022, you might need to find ways to eliminate your debt. You might also want to learn the best financial hacks to use this year to get your finances in order.
Here is a guide to help you learn the best financial hacks to use to improve your financial state.
Find Out How Much Debt You Have
Carrying balances on credit cards from month to month is common for American adults. However, when you do this, you can incur interest charges, and these charges increase your balances.
When people have multiple credit cards, they might be afraid to add up their balances. They might not want to know how much they owe for fear that it’s more than they thought.
As a result, they ignore it and try to make a payment each month to stay in good standing with the credit card lenders. While this is an option you can choose, it’s better to find out how much you owe.
If you know how much you owe, you might have a better chance of finding a way out of your debt. So, find all your recent credit card statements and add up the balances to see your total debt.
Keep in mind, knowing your total debt might scare you, but it puts you in the best position to start paying it off.
Bite the Bullet and Create a Budget
If you’re not yet using a budget, you may want to bite the bullet in 2022 and learn how to budget.
Budgeting is a useful tool that helps you in several ways. Here are some of the ways a budget helps:
- Ensures you pay every bill each month to avoid late payments
- Shows you where your money goes each month
- Gives you power over your spending
- Encourages you to save money
Creating a budget isn’t hard to do, either. You start with your total monthly income, reflecting how much money you have coming in each month.
Next, you write down all your bills and their amounts. Then, when you subtract your bills from your monthly income, you find out how much extra money you have left.
You can use the extra money for groceries, gas, clothing, debt, savings, or other things.
Look at Options for Paying off Your Debt
The next financial hack to consider in 2022 is debt repayment options. If you owe a lot of money, you might want to pay it off this year, or at least develop a plan to repay it.
One option is to consolidate debts through a credit counseling firm. You can also consolidate your debts by borrowing money through a personal loan or home equity loan.
You can use other methods to manage your debt, too.
For example, you could transfer your balances to a credit card with a 0% interest rate. After doing that, you could focus on paying as much as possible each month to repay the money faster.
If you can pay off your debt, you’ll free up cash in your budget each month that you can use for other purposes.
Start Controlling Your Spending
The next thing you can focus on in 2022 is learning how to control your spending.
Do you waste money? You might not think you do, but you can find out by using a simple exercise. Write down everything you spend money on and look closely at the list at the end of the month.
When you take the time to do this simple activity, you’ll probably see all the ways you waste money. If you want to focus on money savings, you could use this list to find ways to cut back on useless spending.
Make This Year the Year You Develop an Emergency Fund
Another financial task you can focus on is developing an emergency fund.
If you don’t have an emergency fund, you might panic each time you experience an emergency expense. If you don’t have money to use for these expenses, you might charge the bills on your credit card.
If you had an emergency fund, you could rest easy instead of panicking each time you encounter these situations.
You can set up an emergency fund in a savings account or any other type of account. You can even look for smart investing ideas to earn more interest on your money.
When you set it up, start small. For example, put $100 in a fund and don’t touch it. If possible, deposit $50 or $100 from each paycheck. You’ll be surprised how fast it will grow if you make consistent deposits.
Take Control of Your Credit Score
Finally, you might want to make 2022 the year when you focus on your credit score. Your credit score affects your life in several ways. The primary way is the effects it has on borrowing money.
If you want to borrow money to buy a car, you must apply for a car loan. The car loan lender bases the decision and interest rate on your credit. The same is true when buying a house or any other large asset.
Focusing on improving your credit score might prove successful for you. If so, you may see a significant increase in your score, making it easier for you to qualify for loans when you need them.
A higher score might also open up opportunities to qualify for lower interest rates on credit cards.
Following These Financial Hacks Might Give You Hope
If you’re struggling with your personal finances, why not make 2022 the year you focus on improving your situation? You can use these financial hacks to help you achieve this vital goal.
Did you like learning about personal finance by reading this article? If so, check out other personal finance articles on our site.