It’s fair to say that personal finance management is not often taught in many learning institutions, however, this is one thing practically everyone must face in the course of life.
Having stellar financial skills makes life much easier in a range of ways.
For one, your credit score will be impacted by the way you spend money, and it will equally affect the number of debts you will be saddled with at the end of the day.
With that being said, if you are really after some sound tips on managing your personal finances, the below will certainly help.
#1 Get your money organized
Before you can even think of budgeting, you first of all have to get your finances organized. You should equally know exactly how much is accessible, what you already have, and where more money is coming from.
Your best bet is to organize a system for bills and paperwork, then put the due dates for all the bills on a calendar with corresponding reminders.
Even more, late fees should be avoided like the plague, and you need to use online banking channels to keep daily tabs on your account status.
By organizing your money, you stand to save a lot of funds and equally avoid financial obstacles such as overdraft fees, charges for late payments, and other charges that are capable of sending your funds down the drain.
#2 Create a budget
With your funds properly organized, you’ll be in a better position to plan a budget. Many people avoid budgeting because they think it is a boring process.
Yes, sitting down to add up numbers, list expenses, and ensure that all the figures tally can be tasking. However, if you are typically bad with funds, then budgeting is your only solution.
So, if you don’t already have a budget running, take some time out to create one. There are people who might think it is not necessary, but the importance of budgeting is parallel to that of windshield wipers in the rain.
You may find it a bit tough at the initial stage, but you will enjoy the benefits at the end of the day. Majorly, budgeting will summarize your financial situation, making it possible to see your financial standing with clarity and full transparency.
The importance of this cannot be stressed enough when it comes to managing your money. This initial step will help you offset your debts and continue with disciplined savings for a better future.
Furthermore, you can save for things like a car, mortgage, and of course, retirement. This way, your financial life will be balanced, and you’ll enjoy peace of mind.
#3 Once you have the budget, use it
Making a budget is completely useless if you tuck it into a folder and allow it to collect dust. From the first day of the month, you have to consult the budget for every expense.
More so, updating it is equally important; since you pay off your bills periodically, your budget must be brought up to date.
Also, try to always have a clear idea of how much you have already spent, how much cash you have at hand, and how much you still have to spend.
If you constantly refer to your budget, you’ll discover that there may be some certain expenses you may want to make during the course of the month, but end up changing your mind. Because, once the facts and figures on that piece of paper raise a warning signal, it is a no-no.
#4 Set up a savings goal
More often than not, people are less motivated about starting a savings account. Some will even start it but abandon it in the long run.
There’s a category of people who just skate by when it comes to saving sparingly. Here, the key phrase is “disciplined savings”, decide on the exact amount you want to save monthly, and stick to it.
More importantly, save before spending, that way, your disposable cash is what is left after you take your savings to the bank.
The purpose of having a savings account is to cushion the effect of any fall that may result in the future. People have fallen sick and stayed in recuperation without earning income.
Some have experienced unprecedented happenings such as, losing a job, fire outbreaks, and many more. When this happens, it’s your emergency savings that’ll come to the rescue.
No doubt, we understand the urge to spend money is always there, however, whenever you find yourself faced with a buying decision, especially when it’s an extravagant one, don’t trick yourself into thinking it won’t hurt you financially.
Be realistic about the state of your finances and ensure that the funds you want to spend are not actually meant for something else.
#5 Set a retirement plan
No doubt, many people have resorted to living from one paycheck to another, despite the fact that their earnings are more than enough. At the end of the day, this category of people will definitely not have a retirement plan.
According to statistics, about 58% of the American population doesn’t care about activating a retirement savings account. So, what happens to these people in their old age?
For the most part, if you want to be comfortable in your advanced years, you must have a tidy nest egg tucked away somewhere.
#6 Don’t buy when you can borrow
Sometimes, just because you can, you buy items that can be rented or borrowed. People buy books that sit there collecting dust, they equally buy DVDs and never watch them. When it comes to magazines, some of us have piles and piles of these publications and they are just there for show.
Instead of buying all these things and letting them go to waste, you can either rent or borrow them for a smaller fraction of the money spent buying them.
Things like athletic equipment, party supplies, and tools can be rented and returned later. By renting, you’ll be saved from the hassle of storage, upkeep, and you’ll generally treat the items with care.
However, refrain from renting blindly; it will be in your best interest to simply buy items you use steadily. For the most part, a simple cost analysis will tell you whether to buy or rent.
#7 Pay off debt
Never allow your debts to accumulate, pay them off as they pop up. Debts can become a huge obstacle in terms of attaining your financial goals.
For this reason, make it a priority to pay them off when they’re due. In this case, a debt elimination plan will come in handy – you can set one up to help you make prompt payments.
For instance, instead of making minimum deposits on all your debt accounts, any extra money should be channeled toward one debt at a time. With one debt completely paid, all the money that was initially meant for it can be moved to the next debt.
By doing this faithfully you’ll create a debt-paydown “snowball effect.” Once your debts are completely wiped, the way forward is to commit to staying off debts, in fact, leave your credit cards at home. With that out of the way, you’ll be in a better position to save up some back-up funds for the future and other contingencies.
Furthermore, accumulating debts is bad news when you are a student with an education loan. What happens to your student loan when you file for bankruptcy? Well, it should be enough that you have a student loan to pay up, so don’t contribute more with expenses that can really be avoided.
#8 Spend only cash at hand, not the funds you hope to make
To bring this piece to a conclusion, it’s a must to talk about spending money that you haven’t already made.
Even if you have a steady income, don’t collect things on credit just because you know you’ll be able to pay up in a couple of weeks. What if that next income never comes?
What if you encounter an emergency or lose your job? The most recent coronavirus pandemic has really taught people hard life lessons, especially in developing countries.
Many workers in the private sector have lost their source of livelihood. In fact, a handful of them didn’t even receive their wages for their last month at the office.
If anyone in this category collected items on credit, that makes for an incredibly tricky situation.
Unless it’s an emergency, be sure that what you spend is what you already have.
That way, you’ll stay away from unnecessary debts and be in a good position to plan for a better future.