Personal finance management is something that we don’t learn since our childhood, nor is it taught in schools. But it is something that we must learn as soon as we start growing up, as it is something we have to deal with all our lives!
Here are a few simple tips that will hopefully guide you to manage your finances.
1. Spend Less than You Earn:
It may sound very cliché, but this is the most straightforward hack ever. You should always spend less than you earn. Most people don’t stick to this rule, but it’s very simple. For instance, you make $1000 per week, and if you spend $1200, you won’t be able to save for your future, or maybe pay your bills, get full grocery, or anything at all. It’s a lousy way to live. But sadly, life is not as simple as defined. It’s very effortless to slip in a hole without knowing it. Sometimes an unexpected car bill can make you spend extra, or sometimes you can have a surprising visitor come stay with you!
However, you can always at least plan on investing, and maybe in the more extended period, you can ask for a pay raise, or even pursue towards a higher paying job! Spending less is all about your mindset. Reducing your expenses is one of the easiest methods of sorting your finances.
2. Stick to Your Budget:
If you do, or if you don’t have any debts, you need a budget anyway. Making a budget is more convenient than actually sticking to your budget. Many simple things that can help us keep on track. A few are:
– To keep your receipts and write them down at the end of each day. It gets easier to track and calculate.
– Whenever you have the urge to buy something, ask yourself, “Do I really need this?” It will help avoid compulsive buying.
– Stop shopping at pricey stores. If you want a t-shirt, go to the store that offers it for $10, instead of $40.
– Review your budget plans regularly! Keep your financial status in your mind always! It helps you remember your goals and cuts down the desires to spend.
– Use every last bit of everything you use. Make sure to finish every last bit on your plate and not throw it away.
– Do right amount of research before you go and buy anything important or expensive.
– Always save. Take out 20% off of your salary before you make your budget and pay your bills.
If you want to be wealthy, you should invest! And you should invest early, often, and as much as you can manage. But some people don’t prefer spending to invest because they think they need a lot of money for it. That’s where people are wrong. You can start investing with as little as $20! The key is to be persistent and save wherever you can. Here are some tips that can motivate you:
– Try the cookie jar approach. Try putting whatever you have collected during the day in an envelope or a jar, and try doing it every day. Try to make this a habit, even if you have $2 at the end of the day, put it in your savings jar.
– Start from small, like index funds, betterment funds, and mutual funds.
– Later move on to real estate or dividend stocks.
– Enroll in your employer’s retirement plan. You can start with investing just 1% of your salary every month.
– Go to Bitcoin Investment programs. Bitcoin is digital currency and also has low transaction fee!
4. Emegency Funds:
Let’s face it, unexpected financial problems can arise anytime, and it’s not easy to avoid them too. So, it’s always a good idea if we have some savings to help us when our car breaks down, or our washing machine stops working, or even if we lose our job for any reason.
Another benefit is that emergency funds also help us clear our debt. Emergency funds help you with unexpected spending so you can pay off the debts (if you have any).
5. Good Insurance:
Insurances can be your best friend! They are always there to take care of things you didn’t plan for. Three most essential insurances everyone must have are Car-Insurance, Life Insurance and of course, Health Insurance.
Almost all states require having a minimum amount of car insurance. It provides benefits when an accident occurs, it covers lawsuits and legal fees, and it covers vehicle repair dues as well. Car insurance also include the damage caused by accidents like theft, fire, etc.
- Life Insurance:
First off, if you are the one who is earning for a family, or if some of your family depends on you, you need insurance because if you die without an insurance, it can create a lot of problems for the ones depending on you. These may include income issues, debts, bills, etc.
Life Insurance these days is extremely affordable, and you have the flexibility to choose any company and whatever insurance plan that suits you. You are the one who gets to decide the duration, coverage, beneficiary, etc.
- Health Insurance:
Health benefit is also significant when you are trying to manage your financial life. Many people say “why do we even need health insurance?” I’ll tell you why.
Insurance companies are an expert on negotiating with hospitals and their crazy bills. Negotiations between doctors and hospitals are standard, and they can reduce our bill up to 50%!
When you have health insurance, you can avoid those long waits at the ER. With health insurance, you can directly go to your primary care physician, and cut the waiting line and get yourself fixed at the initial stage only.
These are of course few of many benefits, but I find these convincing enough!
Hopefully, this mini guide of mine helps you to solve and sort your financial life. Happy Financing!
Sarah Smith has been a personal finance author for the last five years. She is also, an independent and very passionate finance and investment advisor. She regularly posts at PersonalIncome.org