Managing money can be very difficult at times and the present situation is such that it is even more. It has never been so important to handle personal finance in past than in todayâ€™s economy. It does not really matter if you are a wage earner or self-employed, you should know where you stand financially to ensure your success and survival in tough economic situation. You can find ways to manage your personal finance in a better way in this article.
1. Maintain aÂ fixed budget:
It may be difficult to believe but the most common mistake that people make in managing or mishandling their finance is that they donâ€™t make a budget. Trying to manage all your bills and money without any budget is just like performing a very risky act without taking any precaution. The damage caused by this may be irreparable. Prepare at least basic record of your earnings and where it is going. This is the most essential way to assure your financial security.
2. Set your financial goals and work towards them:
The harder you work, the easier it becomes to get caught up in a never ending work cycle and you may not even get time to rest. You may be living to work and not working to live and you may not even have any goals. We all want to work towards something whose success can be measured.Â Think about where you want to be in next 5 years, 10 years or next month and focus on that. The prize that you have to give for this does not matter. It may be a trip to Europe, early retirement or getting pedicure done. The thing that matters is to have a target and use your budget to fulfill it.
3. Build an emergency fund:
No matter how seriously we plan, emergencies are borne to happen and this can break your budget and bank balance quickly. The best way of avoiding disasters is to plan for it. Emergency fund forms an integral part of budget and there should be faithful contribution to this. It is essential to determine your own definition of emergency. A broken garage door may probably qualify in this while the tickers to a concert wont.
4. Start investing for your retirement as early as possible:
No matter how you make your living, chances are there that you wonâ€™t be able to live with it forever. Most of us never get an opportunity to enjoy golden years of our lives even after working hard to get there. The cost of living is soaring daily and many individuals are forced to retire while working for one job. The best way to avoid getting trapped by all this is to build up retirement fund as soon as possible. You may have investment, corporate plans or savings but a retirement plan is most essential of all.
5. Health insurance is also an investment:
Accidents or illness should not wipe away everything you have in your emergency funds or put you into debt for rest of your life. Your financial position can get devastated by the hospital stays and medical expenses and your credit becomes risky. Health insurances help you to stay prepared for the worst thing that might happen. If health insurance is not provided by your company, shop for the best plan for your own lifestyle but donâ€™t just avoid it. Health insurance has become a necessity now and you need a proper budget for that.
6. Credit is just like a double edged sword:
This is nothing new to know if you pay little attention to news daily. Over the past few decades, easy credit is seen as downfall of many individuals, families and corporations. There is nothing like credit card to provide real purchasing power to people. Similarly, there is no quicker way of breaking your budget because if that happens, you become unable to repay all your accumulated debts. Find some friendly creditors for present as well as future. Use credit sparingly and ensure that you include your payment in the budget too.
7. Learn how to file income tax return:
You may be paying a tax preparer each year but then also learning how to file your own tax is very important. Even the most capable and honest accountant can make errors. If you donâ€™t find such errors, you may lose all the benefits of tax. You may also end up owing back tax with some expensive penalties. You just need to have a basic understanding of the process for avoiding any kind of trouble.
8. Look before you leap:
Money management needs a slow and careful approach. It starts from preparing budget then investing and purchasing. Anything that may affect your future is worth your time spent on consideration and finance can also affect your future. Before purchasing a new iPad, consider if it is in your budget or not and then wait for some time. If you still think that you need it, research on it. Remember haste makes waste and you should apply this principle in the finance world also.
9. Donâ€™t waste:
Always remember the saying â€œWaste not, want notâ€. Many people never learn value of this statement. We all prepare bigger portions than what we consume, make impulse purchases and forget simple things like turning off the light and unplugging phoneâ€™s charger or any other device in the house. This ends up in the form of huge utility bills and neglects checking and replacing of weather strip and repair of leaky faucets. You should learn to be frugal for making tremendous difference in money that is left over for the month.
10. Remember the purpose of budget:
It is important to remember the purpose for which you are making your budget. The purpose of budget ensures that you donâ€™t spend more money than what you earn. This is the basic principle of financial strategy and it gets you farther than any magical formulas that you may discover.