Financial freedom is something that most of us yearn for, but few only achieve. A big part of not being able to achieve financial freedom has to do with a lack of knowledge of financial planning.
Due to an inability to manage their resources, a significant portion of Americans finds themselves operating on a tight budget; there is often not much left for saving.
This article will share tips on how to pay your bills when money is tight, as well as best practices for achieving financial freedom.
Table of Contents
Prioritize Your Bills
You will need to prioritize bills according to how important they are to you. You need a roof over your head, food, lights, heat, phone service, and transportation at the bare minimum to survive. Therefore, give priority to the following bills:
Mortgage
In addition to ensuring that you still have a place to live in, you need to prioritize mortgage payments to protect your credit score. A missed mortgage payment can lower your credit score by up to 100 points or more. With a bad credit score, you will find it challenging to secure loans, and if you do, you may pay extremely high-interest rates.
Nonetheless, lenders do not report late payments until you are at least 30 days past due. Try to make that payment within three weeks to avoid being reported.
Rent
If you are a renter, do your best to pay this bill on time. Landlords can be ruthless with some sending eviction notices as soon as you miss the deadline. Even though the eviction process can take time, you do not want to give them an excuse to initiate that process.
Car Payment
Being late on your car payment is likely to get you reported to credit bureaus, thus affecting your credit score. However, your auto lender cannot inform the credit bureaus you until you are at least 30 days past due. Therefore, do all that you can to make that payment within those 30 days to protect your credit score.
Do not forget that auto lenders can repossess your vehicle when you stop making payments.
Utility Bills
To avoid getting your water, heat, and electricity cut, you will also need to give your utility bills priority. Fortunately, some utility companies are understanding and will be willing to work out a plan with you. Therefore, do not ignore their calls.
While you are at it, look for cheaper service providers. Since electricity is one of the most utilized energy sources in a home, look for affordable electricity options, or a light company with no deposit.
Credit Cards
Squeeze your finances and clear your credit card bill to avoid being hit with a late fee, or your interest rates may be raised by the lender.
Do not give your credit card payments precedence over other bills on this list. Let them be last on your priority list.
Ways to Save When Money is Tight
Times might be rough, but a penny saved is a penny earned. Here are some tips for saving when on a tight budget.
Change Your TV Service
Cancel your satellite or cable service and switch to a cheaper alternative, such as Netflix. As long as you have the Netflix app, you will only pay between $8.99 and $15.99 a month.
Evaluate Your Food Bill
For starters, stop eating out; it is too expensive. Make enough food for dinner so you can have some left to carry for lunch. Also, take advantage of sales at the grocery store to stock up on the staples.
Use Cash for Daily Expenses
Paying in cash can help curb impulse spending since it makes you more aware of its value.
Make Cuts in All Areas
Make a list of everywhere your money goes to and look for ways to cut on those expenses. This will mean making sacrifices. For example, leaving the car at home and taking public transit to save on fuel expenses. If you live alone, getting a roommate might be a good idea.
Pay Your Debts
Once you start saving, work towards clearing high-interest debts, such as credit cards, so they stop eating up your income.
Saving on a budget is difficult, but possible. You just have to be willing to sacrifice.
Resources to Regain Financial Freedom
The following resources will prove invaluable in your quest to regain financial freedom:
Student Loan Hero
It is challenging to have a decent budget when a significant portion of your salary goes towards servicing your student loan.
Student Loan Hero is a resource that helps you customize a plan to pay your loan on time while offering you strategies that suit your financial situation.
SoFi
SoFi is a tool that helps you lower your loan payments by offering you refinancing options. Check it out!
Mint
Mint enhances your financial literacy by helping you develop a customized budget based on your spending habits. The free app also offers you budgeting tips while alerting you before you exceed your budget.
Honest Dollar
Honest Dollar is a tool that guides you on everything you need to know about saving up for retirement. It will also help you choose the appropriate account for you.
Turbo
Turbo is an app that gives you a clear, holistic view of your financial health. It also gives you advice on what you can do to improve.
The Bottom Line
To be truly financially free, you will need to seek out and utilize all the money advice you can find. Ensure that you are always proactive about your financial health. It will save you a lot of stress.