Raise your hand if you feel confident about your finances. Not feeling it? That’s OK.
Perhaps you’re among the 60% of Americans living paycheck to paycheck, or one of the 81.6 million paying off student loan debt.
It’s hard to feel confident when your loan balance doesn’t seem to budge and you’re fishing through the couch cushions for spare change to put gas in your car.
But you can gain some control over your finances, bit by bit, until that confidence comes. These empowering money moves will help you build momentum with small gains.
1. Track your spending for one month
Knowledge is power when it comes to finances. Still, most people don’t know exactly where their money goes. Tracking your spending for one month will help you identify habits and spot excess expenses, says Colin Walsh, CEO of Varo, an online bank.
“By keeping track of each and every purchase you make … you can more easily start to see how small purchases here and there add up,” Walsh says.
Once you know where your money is going, you can make informed decisions about where you want it to go, giving you a sense of purpose with your spending. You might even decide to keep on tracking.
2. Switch to a high-yield savings account
If you’re already doing the hard work of saving, why not make money on your money?
Most savings accounts earn minimal interest — the average annual percentage yield is just 0.09% — but several offer close to 2% interest.
Here’s the difference that can make: If you have $1,000 in a savings account with an APY of 0.09%, you’ll earn a measly $4.51 over five years. In a 2% APY account, that same $1,000 would earn about $105.
3. Increase your credit score
First things first: If you don’t know your credit score, start there. Several credit card issuers and personal finance websites offer free credit scores, so you can monitor it regularly and keep tabs on your progress. You can get your full credit report for free every year from each of the three credit bureaus using AnnualCreditReport.com. (Note: Checking your credit report does not hurt your credit score.)
Now, look for ways to increase your score. A few ideas:
• Check for errors on your report and dispute any you find with the credit bureau.
• Lower your credit utilization (the percentage of your credit card limit that you use) by paying down cards or increasing your credit limits.
• Become an authorized user on a partner’s or parent’s credit card.
You can use a credit score simulator to learn ways to boost your credit score, as well as see the negative impact certain moves could have, like missing payments or increasing your credit utilization.
4. Pay off one loan or credit card
Ever feel like you’re throwing money at your debt, but the balances never seem to go down? Instead of trying to pay them all off at once, direct your energy (and extra money) at one debt, while making the minimum payments on the rest.
You can tackle your debt in order from the smallest to largest balance to net some quick wins, or get rid of your most expensive debt first by focusing on the account with the highest interest rate.
Tackling debt in a disciplined way will put you back in the driver’s seat with your money.
5. Plan for expected expenses
You can’t plan for every expense, but there are some you can see coming. Homeowners, for example, can anticipate things like property taxes and certain repairs.
“If you have an old roof, you’re going to eventually need to replace it, so start setting money aside for that,” says David Carlson, founder of Young Adult Money, a personal finance blog.
The financial hit won’t sting so much if you’ve set a little aside each month, and you’ll feel more confident knowing you can cover the cost without rearranging your budget or going into debt.
6. Negotiate your salary
Few things are more empowering — or intimidating — than advocating for your own worth. If you’re on the job hunt, start practicing your negotiation skills now so you can use them when an offer comes in. Arm yourself with salary data for your role and experience level and list the various qualifications you bring to the table. The same tactics help when asking for a raise from your current employer.