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In these trying times, it’s ideal to be always prepared for contingencies. One of these is unemployment since there’s no way to know the economic stability of companies nowadays. It’s dangerous to have a very laidback mindset during times of crisis since the future will always remain unpredictable.
Thus, it wouldn’t hurt to live more wisely and manage your personal finances more efficiently. This doesn’t mean depriving yourself of the finer things in life nor stop treating yourself once in a while. It simply means being smarter in handling finances, setting a budget, and keeping savings or an emergency fund.
You can be the master of your personal finances with these tips and tricks:
1. Create Annual Financial Goals
A crucial part of managing your money wisely is creating annual financial goals. For instance, if you want to take your family on an international trip next year, you should already make it a point to start saving for that goal at the beginning of the year. If you intend to pay off your car as soon as possible to become debt-free, then allocate a portion of your monthly budget for that purpose.
Being responsible with your finances isn’t something you’ll necessarily have to do on your own. You can seek the help both of physical and online financial advisors, including the best robo-advisors, especially if you feel the need to hire one. These financial advisors can help you overcome your struggles in managing your finances, and help you create positive changes in that aspect of your life.
2. Distinguish Your ‘Needs’ Vs. ‘Wants’
Separating your needs from your wants simply means spending your money in the wisest way possible. Unless you have an unlimited source of income, you can’t simply keep buying things—not even because they’re on sale. You should have a strict budget for your needs and assign your remaining cash for wants.
However, this doesn’t apply to things you’ll eventually use. For instance, when you’re grocery shopping and see household items on sale, you can add them to your cart without worries. This is because you know that these items will eventually be useful, plus they’re discounted, so might as well take advantage of the reduced price.
3. Build An Emergency Fund
An emergency fund serves as your fallback, to be spent only in times of unexpected events. Although you may have a health insurance policy, not all emergencies are health-related. Thus, it’s always financially sound to build an emergency fund. The whole point of this fund is to save enough money to get you by in case of emergencies. Through this, you won’t have to exhaust your savings or get into debt.
A good amount to save for an emergency fund should be equal to at least six months of your salary. This is enough amount and time for you to recover from the emergency you’re facing.
4. Have A Budget
In creating a budget, you should always consider your salary. Writing down your budget weekly or monthly, be it in your planner or through an Excel sheet, can help you manage your finances better. You can also use a budgeting app or anything you prefer.
It will be easier for you to stay within your budget when you know where every penny of your salary is going. Make sure all your expenses are accounted for, including bills for your insurance payments, your savings, and other investments as well. If there’s money left after calculating your expenses, you may allocate that for little luxuries you’d want to reward yourself with, such as dining out, traveling, or big-ticket items you’ve been eyeing for a long time.
5. Pay Off Your Debts Immediately
Getting into debt is the number one cause of mismanaged personal finances. There are many reasons people get into debt, such as student loans, health emergencies, mortgages, among others. While having debts is quite normal, you shouldn’t wait before paying them off. Otherwise, instead of creating a budget, you’ll be burdened with thoughts on how to settle your debts plus the high-interest rates.
Whenever you get enough money for paying off your debts, go ahead and settle them. The sooner you pay them off, the better you can manage your personal finances.
When it comes to your personal finances, many factors come into play. Think expenses, debts, savings, and even your investments. Managing your finances involves staying away from debt as much as you can. Your hours’ worth of work will only go to waste if your hard-earned salary gets eaten up by your pile of increasing debts. The tips above can help you manage your personal finances and move toward enjoying a more stable financial future.