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When it comes to personal finances, many people take a reactive rather than a proactive approach. A reactive approach to personal finances means that necessities and expenses dictate how one allocates money. In other words, individuals pay the bills as they arrive rather than planning for them ahead of time. This method becomes especially problematic when unexpected expenses arise and leave people scrambling to make ends meet. Having a reactive mindset also affects how people spend money.

Because reactive individuals generally do not have a set budget, they are more prone to make impulse buys or purchase something because it is a good deal rather than because they actually need the item. Because the bill will come later, reactive people rarely think about the consequences of such purchases. A reactive mindset predisposes someone for living “paycheck to paycheck” and can even result in lifestyle inflation, where spending increases as income increases. This makes it very difficult to save money.

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A better approach to personal finances involves being proactive. A proactive person will look ahead and plan for coming expenses while also setting aside money for unexpected financial emergencies. A proactive approach avoids the stress that comes with barely making ends meet and allows people to set priorities for their money that will help them reach their personal goals. To be proactive, individuals need to look at their cash flow and figure out exactly where they want their money to go.

For some people, this planning comes in the form of budgeting. For others, setting priorities creates enough of a framework for meeting monthly responsibilities while also working toward certain goals, such as a vacation fund or retirement.

The following are some ways to be more proactive regarding one’s personal finances:

  1. Make time for financial planning.

Financial planning does not happen without some amount of effort. Today, people have busier lives than ever before. Because of this, financial planning often does not happen unless people actually make time for it. Ideally, individuals set aside a specific time each week to think about their goals and evaluate their progress towards them. This dedicated time allows individuals to make adjustments to their framework or formulate a more robust budget. Often, using some piece of software or a budgeting app can provide a new prospective on personal finances and help people envision more proactive approaches to spending and saving.

  1. Save for emergencies.

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One of the most important aspects of proactive finances involves an emergency fund. This small savings account can help people avoid having to take out a payday loan or put large sums on a credit card that will just accrue interest. An emergency fund helps individuals stay out of debt so that they can use as much of their income to their advantage as possible. For example, not having to make interest payments means one can have more money available to put towards a new car or investment opportunities.

  1. Analyze use of conveniences.

The world has become more convenient than ever before, but this convenience comes at a price. Individuals may not realize how much money they spend on convenience until they actually start paying attention. For example, buying food at a movie theater is easy, but people can pay a fraction of the cost to bring food in with a little bit of planning. For many purchases, individuals can save a significant amount of money by taking a few minutes to comparison shop online. Even grocery stores can be a convenience considering how much money one can save by purchasing in bulk at warehouse stores like Costco.

  1. Increase income to meet needs.

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Sometimes, no amount of adjustments in a budget makes it possible to meet financial goals. In this situation, individuals need to think about ways to make more money. While some people may be in a position to ask for a raise, other people will need to be more creative and look into taking side jobs. Luckily, making money on the side is easier than ever before with apps like TaskRabbit, Lyft, Uber, Wag!, and many others. These apps let people work on their own schedule to earn some extra income and make their budget work. Individuals may also want to think about options like education that involve some upfront investment but can significantly increase their future earnings potential.

  1. Stay out of debt.

While debt can sometimes seem unavoidable, a major tenant of proactive personal finances is getting and staying out of debt. Many of the other tips on this list can help address the issue of debt, but paying down debt involves a strategic approach that focuses on payments with the highest interest. Also, individuals should avoid racking up additional debt while working on their current debts. In other words, people should spend within their paychecks rather than putting purchases on a credit card so that they have more money to pay another debt. Switching from one form of debt to another in this way is a sign of reactive rather than proactive personal finances.