Jaspreet Singh is the creator of the massively popular YouTube channel “Minority Mindset.” In a 2023 video, Singh outlined the steps you can take to understand and improve your current money situation.
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Singh is a proponent of hard work — investing in yourself and your future takes time, but setting yourself up for a solid financial future is worth it. Here are his steps to get your finances in order.
Track Your Income and Spending
Singh said tracking your spending is the first step to organizing your finances. Getting a money coach or talking to a financial advisor might seem like a good first step, but Singh said you don’t need to pay for money advice first. All you need to do is to understand where your money goes each month.
Start with your income, he said — every source of income you have. Then, he recommended reviewing your bank and credit card statements and adding up your expenses each month. Break them into categories to see where the majority of your paycheck goes.
This information should help you see “exactly where every penny went” — restaurants, utilities, housing, etc. Ultimately, awareness of where your money goes is the first step. Next, it’s time to make some changes.
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Make Adjustments
Now that you’ve spent time tracking your income and spending, Singh said, you will see patterns. Maybe it’s that you used DoorDash quite a bit, or perhaps it’s that you have a lot of subscriptions you don’t use. Think about where you can cut back on your spending.
When it comes to your income, maybe you realized you don’t earn enough to cover your expenses. To fix that, you can also get a side hustle to help you increase your income.
Either way, make adjustments. Some may be significant changes, like moving to a more affordable house. Others, like limiting eating out to once or twice a week, are small changes you can make to create more cash flow into the budget.
Rise and Repeat
Although it would be nice to track your spending for one month, make adjustments, and move forward from there, this is a practice that is important to rinse and repeat. Some seasons, like the holidays, create more spending. Or you might want to spend more on travel in summertime.
As you gain a better sense of your finances, Singh said, “you’re going to have better control of your expenses” and be able to start optimizing.
Having a sense of where your money goes at certain times of the year can help you to prepare and pre-plan near high-spending months. This gives you control over your finances and allows you to see where you can trim and where you might need to save more for upcoming holidays or events.
Use Three Bank Accounts
Singh advised his viewers to separate their money into three bank accounts. One account is for spending, one is for saving, and one is for investing. Creating three accounts prevents you from spending money you meant to save and saving money you meant to invest.
You can set up automatic transfers between your accounts and even invest automatically. Setting things to autopilot can help ensure that you continuously invest in your future. Leaving the money in your checking account is not the best option, because it can easily lead you to spend on things you don’t need.
Don’t Finance Your Purchases
Speaking of spending on things you don’t need, Singh is against financing purchases such as electronics, furniture and cars. There are so many opportunities today to finance even the smallest purchases, with checkouts offering to split up payments even if you’re just buying clothing.
However, Singh said you should only buy things you save up for and pay for in cash. Going into debt with high-interest payment plans will prevent you from allocating cash toward your investments, which is the primary financial practice that will help you build wealth in the future.
Focus On Investing
Finally, Singh stressed the importance of investing. While many people focus on increasing their income, Singh encourages his followers to increase the amount of money they invest over time.
He said it can be easy to inflate your lifestyle if you get a raise or a bonus. However, Singh said, it’s better to invest as much as possible, especially if your income increases. That is the path to getting your finances in order and building a secure life in the future.
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This article originally appeared on GOBankingRates.com: Jaspreet Singh: 6 Steps To Get Your Finances on Track
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