Personal financial management is an important part of any person. Mismanagement can lead to debt, bankruptcy and all kinds of a financial rut. So, it’s essential to be in control of the finances.
Some may find managing personal finances challenging. But with so many resources now available, you can easily turn around your current financial situation. With simple and practical tips, you can save more, reduce or completely pay off your debts and make your future financially secure.
Here, in this article, we bring you some of the most useful and practical tips for your personal financial management.
1. Establish your Current financial Stand
Before you begin saving or planning for the future, you first need to establish where you stand financially. This will include your earning, expenditure, debts, savings, investments and other sources. This will give you a clear picture where you stand.
If you cannot do this on your own, there are a number of online tools to help you do it. You can also consult a financial specialist. If you are more of a DIY kind of person then some of the tools like the Mint can help you stay organized and up to date with your finances.
2. Set a Budget
This is the most common financial management tip that you will ever hear. No matter how much you earn or save, you will need to stick to a budget. Don’t see a budget as a restricting thing. It’s a very practical tool that helps you spend money within your limits. Divide your earnings based on what you are going to spend money on.
- As a general rule of thumb, you should spend 20% of your earnings on savings – emergency, paying off debts or retirement savings.
- Allocate 30% of your earnings on your lifestyle like restaurants, movies, eating out and all the other fun stuff you like to do.
- Regularly review your financial transaction. It could be daily, weekly or monthly. This will help you stay up to date with your current financial situations.
3. Learn to Pay off your debts smartly
Debt is one of the biggest reasons why so many people fall prey to anxiety and depression. If you have lots of debts to pay, you need a smarter and easy way to pay them off.
- Start with the smallest debt. This is very helpful. Smaller debts are easier to pay off and as you tick off the number on your list you will feel more confident.
- Stop using the credit card. Stop piling up on your existing debts. Debit cards debt can harm your financial stability. Make sure you use the credit cards for emergency purposes only.
- Opt for smarter loans. Federal loans are more flexible in terms of making the payment and they also come with lower interest rates than the private loans.
- Always keep your mortgage rates to the level you are comfortable paying. A general rule of thumb is that your mortgage rates should not be more than 28% of your current income.
4. Maximize your Income
This is one of the most practical personal financial management tips. You can look for ways you can increase your earnings. Start with your job. You can either ask your current employer to raise your salary or negotiate more in your next job.
- When negotiating the salary never reveal your expected salary first. Ask them first what they are offering. It will give you the chance to negotiate better.
- Take advantages of the bonus and other financial benefits that companies are offering.
5. Start Saving ASAP
When it comes to saving, it’s never too early or too late. Start saving now. No matter where you are financially now, saving will help you in the long run. The earlier you start with your retirement savings the better. Increase your savings as you get salary increment or increase in your overall finances. The more you save the better.
6. Keep an eye on your credit score
A healthy credit score is very essential. Keep your credit score under 30% of your total credit. In the long run, a good credit score will help you in getting loans for funding your studies or buying a house or car. So, make sure that you know what your credit score is. Check them regularly.
7. Try investing
Having money lying idle in the bank is almost as bad as not having any money. Don’t let your money just sit in the bank. You can grow your money by investing, say in bonds, stocks, and mutual funds. This will all add to your retirement savings.
These are some of the practical personal financial management tips. It can help you save smartly and plan for the future while you still enjoy your life and have fun like usual.