For many of us, taking care of our personal finance is a difficult task. Most people are deep in debt, spending money beyond their limits due to high rates of interest, easy accessibility to credits, and lack of knowledge.
To understand money and your expenses, you should look at your past and your personal experiences. For some people, money is considered to be negative or even evil by those who fail to manage it properly.
The truth is that money is neither evil nor good, but it is always good to have lots of it.
Below are some ways that can help you be on top of your personal finance.
Be Tough with your Personal Finances
You have to be very tough when dealing with your personal finances. It is very tricky to deal with personal finance. If we are not taught how to manage money at our young age then how can we learn? For majority of us, money is very difficult to manage and we often fall short of it. The reason for many men and women struggling to manage money is very simple.
Goals Should Be Planned
It is just a wish if you do not plan your goal. To be successful in anything, you should have idea of two things:
- Where you want to go: GOAL
- How you want to go there: PLAN
Work out and come up with your own list of short term, medium term, and long term goals. This plan should include everything, which will have your financial commitment like large purchases, retirement, holidays, building and emergency funds, etc.
As soon as your list is ready, decide on the expenses and time-frame for each of the objectives. If you feel that these things are attainable, then work out on the plans and start to put aside some money on monthly, yearly and weekly basis. This number will help you to reach your goals by doing regular contributions.
Be Aware that Your Earnings should be Greater than Money Spent by You
It’s a no-brainer that your net income after tax should be more than your expenses in total. You have only two choices- either increase your income or lower your expenses. Majority of people feel that they cannot decrease their expenses. If you handle your cash flow properly, then you will know where the cash is leaking and you can reduce your expenses. This may require temporary changes in your lifestyle.
Spend Cash Wisely
Try to re-evaluate your expenses and your spending habits. Before purchasing a cappuccino in a coffee shop, think whether you truly need it. Being strict in your spending habits and spending cash for those items you really need will help you fulfill your long term goals. It is also easy to account and track one another.
There’s something about looking at your very last $20 bill and recognizing that you still have 4 days left before you get ‘paid’ again! It genuinely can make you re-evaluate if you truly need to have that $5 cappuccino or if a regular coffee will do the trick.
Keep Some Emergency Funds
As the good old saying goes – only two things are guaranteed in life – taxes and death! But, there is one more guarantee in life –emergency at one or the other point. People, who own a house or vehicle, are mostly likely to face an emergency in 1-2 years, and when that happens, the money required to sustain those bad days will be lot more than what the monthly expenses. And, that’s when the contingency funds save the day for you.
You ought to have your own emergency funds, which should be more than 4-6 months of your monthly expenses. You should always be financially prepared to face such emergency situations.