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The average American has $90,460 in debt. This includes student debt, credit card debt, mortgages, and more. More Americans than you think are only one paycheck away from homelessness and too many people are living beyond their means.
There are many reasons behind these crises. But one of them is that not enough people in the US have adequate financial skills. That’s where simple money-saving rules can help.
If you are ready to get on top of your finances, following strict rules can help you get out of debt and gain financial freedom. Read on to discover what the best money-saving tips are.
1. 50-30-20 Rule
This is one of the simplest money-saving rules that will help you if you have a set monthly income. The 50-30-20 strategy involves putting 50% of your income on your needs, 30% on wants, and 20% on paying off debts.
If the numbers aren’t adding up, there are things you can do to lower the costs of your needs and wants. For example, you “need” shelter but you can swap your one-bedroom apartment for a two-bed with a roommate.
You can also deprive yourself of certain wants to pay off your debt faster. Ask yourself this question: Do you want to watch Netflix or do you want to be debt-free?
2. Snowball Effect
Some people have lots of debt in different places and it can feel overwhelming. If that describes your situation, pay off the smallest debt first and so on.
The habit of paying off debt will make you feel relieved and less stressed. This will encourage you to pay off more debt so you can keep feeling that relief.
3. Don’t Save More, Earn More
Budgeting is key to freeing up more money to pay off debt but earning more income is also a great idea. Create more active income by picking up a side gig (driving for Uber, etc.) or create more passive income by investing.
4. Consult Finance Experts
If you’re not savvy about personal finance, it’s a good idea to take a free online course from somewhere like Udemy so you can learn the basics. These courses can teach you about savings accounts, taxes, and retirement funds.
When you’ve got a good grasp of the basics, you can progress to learning about the best wealth management firm and the stock market.
5. Create an Emergency Fund
Mathematician John Allen Paulos said, “uncertainty is the only certainty there is.” You might think you have a stable job and home life but in reality, you might be one natural disaster or medical emergency away from financial ruin.
That’s why, as well as retirement and investment accounts, you need an emergency fund. You should save three to six months of expenses in this fund in case something unforeseeable happens.
Use These Money-Saving Rules for Financial Freedom
You cannot undo the mistakes you made in the past but you can rectify them with these money-saving rules. Reducing your debt will help you sleep better, save for retirement, and live a higher quality, less stressful life.
There is always more you can learn about how to invest your money and save for life’s milestones. Browse our website for tons more financial tips and tricks!