Personal Finance 101: Tips for Long-Term Success

Handling finances can be stressful. Sometimes, the hardest part is knowing where to begin, so here are a few tips that might help take some of the pressure off and provide simple solutions for how you set your finances up for long-term success. 

Tracking Your Spending

For at least one month as you start to review your budget, pay close attention to your spending. Make yourself a spreadsheet, and enter every grocery store run, trip to the gas station, and all your subscription services. At the end of the month, sit down and take some time to see what your true expenses are.

This is a great time to organize your purchases into categories and narrow down any unnecessary expenses moving forward. Some categories may include:

• Groceries
• Car: car loan payments, gas, maintenance, car insurance
• Home: rent, mortgage, water and heating bills, etc.
• Credit card bills
• spending: meals out, clothing, gym membership, etc.
• Medical: prescriptions, doctor or dentist appointments, therapy

Subscriptions

• Technology: Internet and phone bills, any phone or computer-related purchases

If you find yourself realizing you spent far more on a certain category than expected, this presents an opportunity to budget adequately moving forward. For example, if your internet bill or phone bill is a little too high for your liking, you can shop around different companies to see if there’s a better price out there for you and your family. Carrington even has a resource for you to shop home insurance rates (and auto, flood, and other insurance needs) to see if you can save money. It's best to shop your insurance rates close to your renewal date - you can keep a year calendar of important finance dates like auto or annual renewals of fees so you can watch your budget accordingly.

Use the 50-30-20 Rule

The 50-30-20 rule is a popular budgeting method that can help you allocate your income in a strategic and efficient way. The rule breaks down your after-tax income into three categories: 50 percent for needs, 30 percent for wants, and 20 percent for savings or debt repayment.

Needs include your mortgage payment, groceries, utilities, childcare expenses, and other monthly bills. These are things you can’t really live without, so it’s important to prioritize these expenses. If your budget allows, it’s also helpful to allocate some of the funds in this category for an emergency fund. Being prepared for unexpected expenses ensures you don’t have to rely on credit cards or other high-interest consumer debt.

Next up is the 30 percent category. This is where you get to spend money on the things you love and enjoy, but that may not count as a “need” such as clothing or a vacation. While these expenses are not essential for survival, they contribute to your overall quality of life and should be budgeted for accordingly. We know not everyone can budget 30 percent for “fun” expenses, especially if you’re watching your budget, so remember the goal is about having some freedom with your money when possible. (Although it’s called a “rule,” it’s important to note that the 50-30-20 rule is a guideline, and can be adjusted to fit your individual circumstances and goals. Some individuals may need to allocate more than 50 percent to needs if their expenses are higher, while others may prioritize saving and allocate more than 20 percent towards that category. The key is to find a balance that works for you and allows you to manage your finances effectively!)

Finally, we have the 20 percent category, which is savings or debt repayment. This category plays an important role in your financial stability and long-term goals. It includes contributions to savings accounts, retirement funds, and emergency funds, as well as any debt payments you may have. Allocating 20 percent of your income to this category ensures that you’re building a safety net and working towards your financial future.

Cancel Unnecessary Subscriptions 

In today’s world, subscriptions play a big role in how we access a variety of services. However, it can be easy to lose track of all the subscriptions you’ve signed up for over the years, and these unused subscriptions (or subscriptions that have increased costs over time) could be taking your hard-earned money out of your bank account. 

First, make a list of all the subscription services you're currently signed up for. This could be anything from streaming services to monthly subscription boxes to gym memberships. Once you have your list, take a hard look at each one, and ask yourself if you're really getting your money's worth. Are you using the service regularly? Do you enjoy and value what it provides? If the answer is no or even maybe, then it might be time to say goodbye. 

Now comes the hard part: canceling the services. This can be tough because some companies will try to convince you to stay with offers of discounted rates or free months. But don't fall for their tricks! Stay strong and stick to your plan.  

Remember, canceling unnecessary subscription services is all about taking control of your finances and making sure you're getting the most out of your money. If the budget is still tight, consider some additional money saving tips and tricks around how to budget for items like groceries, energy bills and more.

Stick to the Plan 

Once you’ve started your budget, stick with it! Making it a routine to update and track your expenses will help you better navigate how you spend each month’s paycheck(s). If you begin to see trends in your spending, update your budget once a quarter to accurately reflect what you’re spending, and kick in these budgeting strategies when necessary. 

If you are overwhelmed by any debt you may have related to your mortgage, we understand and we’re here to help. With Carrington Mortgage Services and our family of companies, you can tap into your home’s equity for a cash-out refinance or home equity loan. We even have a real estate brokerage, Vylla Home, if you’re considering selling your home, to take advantage of the equity you have. For more information, check out www.vyllahome.com to learn more about our real estate offerings, or submit an inquiry for a cash-out refinance or home equity loan.