Personal Finance – Managing Your Money the Right Way

By  |  0 Comments

Personal Finance – Managing Your Money the Right Way

Personal finance is about managing your money through expenditure, savings, and investments. Mainly focusing on meeting a person’s short and long-term financial goals, this term is also associated with budgeting, banking, insurance, and retirement planning.

Personal finance is considered to be important as it helps individuals achieve financial security. It’s also about learning the skills to understand your monthly expenses and income and how to budget the right way.

As experts say, managing your money is more than just math; it’s about the mindset. To learn how you can start building the right mindset towards personal finance management, we’ve compiled some useful tips to help you out.

1. Determine your expenses.

If you’re one of those people who have no idea about the total amount of their expenses in a month, now is the time to start keeping track of it. Check your bank statements and collect all your receipts – from the restaurant bills, groceries down to the utilities. Whether it is paid by credit card or cash, include it in your list of expenses. Doing this gives you an entire picture of your expenses and how you can manage them.

2. Understand your income.

People know how much they are making in a month but don’t really understand how their money comes in and out. After understanding your monthly expenses, both fixed and variable, subtract them from your total monthly income. If you got a positive number, that obviously means you’re spending less than what you’re earning. Actions you can take include increasing your savings or debt payments.

But if you end up with a negative number, which of course means you spent more, try to cut your expenses until you reach zero. Understanding this simple thing can help you improve so much in managing your money.

3. Make a budget and stick to it.

It’s easy to create a budget on how you will spend your month every month. However, stick to it is the challenging part. This is usually because many of us don’t have the discipline to limit our impulse purchases. It’ll be easier for you to stick to a budget if written with your goals and priorities in mind. You can then use the 50/30/20 rule to guide you. 50% of your income is for your needs, 30% is for your wants, and 20% for savings. However, you can choose to adjust the priorities based on your financial situation.

4. Slash unnecessary expenses.

We often buy things we think we deserve. Do you have a gym membership? Why not cancel it and practice yoga or HIIT routines at home? Love buying that $4 Caffe Latte at the coffee shop? Think about how much that will cost you in a year. Maybe you can make your own at home and save some pennies. Check all your subscriptions, memberships, and other expenses you’re paying for. Slash the ones you could live without. Remember, every penny counts.

5. Open the right bank accounts.

Setting up the right type and number of bank accounts is vital in managing your finances. Ideally, you need to have savings, checking, and investment accounts. Having both a savings and checking account will make it easier for you to separate your long-term savings from your spending cash.

That being said, you can save for things such as a new car, emergency fund, new house, and other personal goals. You also have the option to open multiple bank accounts for each of your savings.

6.Plan for retirement.

When it comes to assessing how much you need to save for retirement, you first need to set some goals. At what age will you retire? Around 40 or younger? Where are you planning to stay? In your own house or perhaps, in an assisted senior living community? Or, are you opting to travel the world?

Depending on your goal, contribute to the right plans and save as early as you can. You can consider getting Roth IRA (Individual Retirement Account) or a 401k if it applies to your situation. Besides that, you might also want to look into supplemental coverage for your non-routine medical expenses that can occur as you get older. Applying early for such insurance will minimize your chance of being rejected by providers and get lower premiums.

Start learning how to manage your money as early as you can. Don’t let your finances go out of hand before you start to take action. Taking these tips into account can help you prevent major financial problems in the future. Work on your own phase and be realistic. Once you have the right mindset, achieving financial success will surely be a pleasant journey.

Hannah Murray

Hannah is a freelance travel and fashion writer who prides herself in finding the perfect tours and operators to make your journey as authentic and memorable as possible.

[userpro template=postsbyuser user=author postsbyuser_num=4]

Leave a Reply

Your email address will not be published.