Five Proven Strategies to Resolve Your Financial Issues: Saving, Budgeting, and Eliminating Debt

Five Proven Strategies to Resolve Your Financial Issues: Saving, Budgeting, and Eliminating Debt
Photo by Mark Fletcher-Brown / Unsplash

Managing personal finances can sometimes feel overwhelming, but employing specific, well-known methods can streamline the process. The techniques involve starting to save, stopping spontaneous spending, creating a personal budget, and paying off debts. Here, we explore five effective strategies that can help you take control of your finances:

  1. Pay Yourself First
    This principle, popularized by investor Robert Kiyosaki in his book "Rich Dad Poor Dad," advocates for a simple yet profound approach: pay yourself before spending on anything else. Upon receiving your income, the first portion should be directed towards savings and investments—essentially paying your future self. Kiyosaki believes this method fosters self-discipline, crucial for accumulating a significant amount of money over time.
  2. The 30-Day Rule
    Ideal for those prone to impulse buys, the 30-Day Rule is a powerful tool to curb unnecessary expenditures. The rule is straightforward: when you feel the urge to buy something, wait for 30 days. If after a month you still believe the item is necessary, then consider purchasing it. This practice encourages conscious consumption and helps to avoid depleting your finances at once—a common barrier to saving.
  3. The Six Jars Method
    Originally described in Harv Eker's "Secrets of the Millionaire Mind," this method involves dividing your income into six categories. Whether you use physical jars or different bank accounts in a mobile banking app, the concept remains the same. Allocate 55% of your income for essentials like rent and groceries, 10% goes into savings for significant expenses or emergencies, another 10% for entertainment, 10% for personal development (books, courses), 10% for future financial freedom (investments), and the last 5% for charity, which not only helps others but can also enhance your own happiness.
  4. Saving 10% of Your Income
    For those who find the Six Jars Method too complex, simply saving 10% of all income can be an effective alternative. This percentage is generally manageable for most people and can help build a substantial savings fund over time. Some might opt to adjust this percentage higher, to 20%, or set a fixed amount to be saved regardless of total income.
  5. The Debt Snowball Method
    This debt-reduction strategy, recommended by financial advisor Dave Ramsey, focuses on paying off debts from smallest to largest. Continue making minimum payments on all your debts, but throw any extra funds at the smallest debt until it is fully paid off. Then, move on to the next smallest debt. This method builds momentum and confidence as you see debts disappearing. However, if the interest rates on your debts vary widely, it might be more prudent to pay off the high-interest debts first to save money on interest charges over time.

Implementing these five strategies can significantly improve your financial health. Each method offers a different approach, allowing you to choose the one that best fits your financial situation and goals. By adopting these strategies, you're not just managing money better but also paving the way towards a more secure and prosperous financial future.