Many are now wondering if there are any reasons to manage personal finances at all? Well, everything starts with pinpointing your goals or ambitions. In general, goal setting plays a crucial role in managing personal finances. Think about what kind of life you aspire to, what kind of old age you see and what do you want to leave for your children? Goals show you how much you have to do to get to the life you want.
It is personal finance management that helps you develop a plan according to your goals, teaches you how to spend money wisely, and how to organize a functional family budget.
1. Family Budget Accounting
You should start managing personal finances by taking into account the family budget. You must know exactly how much money comes to the family and what the money is spent on. When you have a clear picture in front of your eyes, it becomes clear where the money goes and how to manage this process.
Every family budget planning in 2022 should be based on your financial goals. Every month, you should do an analysis of where the money is spent and how clearly it is possible to fulfill the plan.
2. Turn Time into Money
Find more time — here is a simple life hack. Many people believe that they cannot improve their financial situation due to lack of time. But at the same time, they have the opportunity to watch TV or surf the internet for several hours.
By refusing this, you will find the simplest source of time, which can be converted into money in one way or another. And it is not necessarily about work — financial education is also very useful and beneficial in the long run.
3. Spend Less Than You Earn
Being a financially successful person is simple math. A person must know exactly how they can increase their income and take constant action for this. Just make sure your income exceeds your expenses.
If you cannot earn more — look for ways to spend less. Proper personal finance management simply cannot do without this basic rule.
4. Create an Emergency Fund and Make It a Priority
Proper management of personal finances is impossible without it. You need an emergency savings fund, regardless of your current debt load. Otherwise, when a difficult situation arises, you will have to turn to loans and plunge into debt even more. Instead of turning to loans, consider Forex trading in Nigeria on forextime.com.
Nevertheless, debt payments are still obligatory, even if very few funds can be allocated for them. After building an emergency fund, you can fully focus on eliminating debts.
5. Pay off High-Interest Debts First
If a person seeking to realize their financial goal has debts that are dragging them down, then, first of all, you’d need to get rid of these debts, and this should become the main financial goal.
As a rule, it is precisely because of debts (irrespective of large or small) that people turn to the issue of personal finance management.
6. Work Honestly
According to Forextime, you don’t have to act like most of the working people in the world, who spend weeks waiting for their paycheque. Think about how you are really useful, how can you improve your work? Show your value to the company, colleagues, and superiors. Where you work willingly and not under compulsion, negotiations and work issues are resolved easily.
In general, this is a fundamental principle for managing money and personal resources. Dedication in every action is the way to the top.
7. Develop a Budget
Be sure to plan a budget, especially if you have debts. Calculate how much you can save and how much you can pay off. Ideally, at least 10% should be set aside, and the same amount should be paid for a loan (although there is a subtle point with your minimum loan payment, keep this in mind).
When you get rid of debt, save all 20% and increase this amount following the increase in your income in the future.
8. Master Programs and Apps for Planning and Financial Education
All of them, to varying extents, help to see the overall picture of the financial situation, income, expenses, and also predict the situation for the near future. And in many cases, you don’t even have to pay for it. It is also recommended to check bank accounts daily.
This is a good habit for those who want to control spending and the distribution of personal funds. If you also want to simplify planning and managing money, pay attention to the applications for finance tracking.
9. Focus on the 50/30/20 Rule
It is recommended to use the 50/30/20 rule if you want to make sure you manage money well and plan your budget:
- 50% of income is spent on fixed costs: utilities, car and equipment maintenance, mortgage, etc.;
- 30% is spent on temporary expenses and pleasures: going to the cinema, gifts, buying clothes, etc.;
- 20% goes to a reserve fund or savings account: for vacations, new housing, retirements, investments, and other purposes.
By analyzing your financial performance with this division, you will know in which areas you are spending too much and to which you are not paying enough attention. Besides, you can optimize your spending by putting extra money into savings if, for instance, it turns out that you only need 45% of your income for fixed expenses.
