Money Management Steps
April is approaching; it means a new financial year is about to begin. You all know what you did in 2018. Your financial planning might have gone awry last year. What have you decided for this year?
Managing personal finances is no picnic. You need to regularly monitor your outgoings and find ways to cut back on unnecessary expenses. The more you save, the more financially secure you are.
Many people face difficulty in managing personal finances for some reason or other. The most significant reason for disorganized finances is inability to pay off personal loans.
Reimbursing a debt is not as easy as taking out it. You miss repayments and late payment fees add up your dues.
Here are some WAYS you should follow to tap into your finances.
I. Set financial goals
Take out some time to write down your short-term and long-term goals. You may need money for buying a home, changing your career, moving to another city and retirement.
Your goal determines your spending. Prioritize your financial goal that seems most important to you.
However, you will simultaneously work on other goals if your priority is a long-term goal such as saving for retirement and buying a new house.
II. Assess your financial situation
Before you create a budget and start cutting down on your expenses, you should assess your net worth.
Your net worth will help you save money. The net worth is calculated by deducting financial liabilities from financial assets.
Your financial assets include bonds, money in a bank account, mutual fund accounts, stocks, and rental income, income from social security benefits and pension plans, and so forth.
Your financial liabilities include personal loans, regular expenses, and a like.
III. Create a budget
You should keep tabs on your expenses to avoid overspending. Note down all expenses you make every day – whether they are repayments toward a debt, food and drink bills, utility expenses, and so on.
Add up all expenses to know the total spending at the end of month. This will help you stay within your budget and give you a complete idea where you can whittle down.
IV. Avoid overspending
If you keep buying what you want regardless of need, you will never be able to have enough funds for your personal financial goals.
Make sure that you use cash to make all purchases. Any transaction with credit card may seem a bit more expensive because you will pay interest if you do not settle your dues within the grace period.
Do not dissipate money on unnecessary things. Buy what you need. Try to stay away from temptations that are the most vital cause of overspending.
Stop going on shopping sprees, restaurants, cinemas, theaters and nightclubs regularly. However, spending a night out occasionally is not a bad idea.
Wait for schemes and discount offers. During discount season, you can save your pounds in buying clothes. You should go to a wholesale market where you can get items at half of the retail price. The more you save, the more financial secure you are.
V. Manage debt
You must have an art of debt management to live with peace and calm. Put aside funds for installment as immediately as you receive your salary.
Make sure that you do not use that money for any purpose. This ensures regular repayments of monthly installments.
If you are managing multiple debts and it is getting tougher to pay them back day by day, you should consider debt consolidation loans.
With a debt consolidation loan, you pay monthly installment toward your new loan only and the loan company takes the headache of doling out money to other lenders.
Consolidation loans come with cheaper interest deals, so you can easily manage to clear all of your debt accounts.
Talk to your lender if your credit card bills are sky-high and ask them to provide you with a solution to get rid of the debt as soon as possible.
Your lender will consider your financial condition and then suggest some ways that may include zero percent APR balance transfers. This offer may remain valid from 12 to 24 months.
However, make sure that you settle your bills within the given time, otherwise, you will end up with paying extremely high APR.
Manage your debts to keep your financial condition stable.
VI. Make more money
Money begets money; investing is a good way to generate income. Though you can earn extra money by doing a part-time job, freelancing or renting a property, you might not have sufficient funds to willful your financial goals.
However, you should opt for this plan only when you have no debt or a small debt with a nominal rate of interest.
Carefully consider all of your options before grabbing any offer. You can choose bonds, stocks, commodities and business ventures.
VII. Expect emergencies
Regardless of what your priority is, you must have an emergency cushion. You never know when an unexpected expense may appear.
You may lose a job, your car breaks down, you need funds for your medical checkups, and so forth. You might not be able to take out a new loan because of earlier debt burden.
If you have an emergency cushion built, you can avoid additional payment of interest that you would pay if you took out a loan.
Start setting aside 10% of your salary for unexpected expenses. You do not need to save money worth of six-month salary but try to put aside for at least three months.
The bottom line
Building up savings is not an overnight task. It takes time and patience. Change your spending habits, manage your debts and earn extra money. Make a budget and stick to it. Sometimes you may get off track but try to get back on the budget. As long as you follow a realistic budget, you will never face financial instability. Invest in your financial future; you will never worry about your finances. So when are you going to plan your finances?