“Money” is one of everyone’s favourite words. But when it comes to managing finances, most people take a step back. Few people are excited about worrying about how much money they spend but it is necessary.
Managing your finances is as important as your source of earning it. Some people are masters at floating in and out of money; one minute they are buoyant and the next they are hit in the head with financial vulnerability. That’s never a good way to go because that easily leads to falling face-first into debt.
If reality mirrored dreams, we would have a magic formula or robot that handles your finances, which tells you “Now is the time to spend”, “No, you don’t need a new car ” etc. But there is none, so you are saddled with the unending job of handling your finances.
Many people take no care of their money till
they come nearly to the end of it,
and others do just the same with their time.
– Johann Wolfgang von Goethe
In this article, we have provided you with five(5) steps to help you successfully manage your personal finances.
First, Ascertain Your Current Financial Situation
To successfully manage your personal finances, you need to know where you stand currently. You can not help anything without knowing what the problem is. Review your current financial situation. Take record of your regular income and expenses.
Yes, it will be overwhelming.
You will come face to face with ridiculous buys. From why you didn’t focus on the rice at home to that item that now sits at the bottom of your closet, you will feel like turning back the hands of time. Don’t dwell on them. Celebrate the good financial choices you have made in the past and focus on moving forward. Be sure to point out current expenses that are hurting your finances.
Next, You Have To Set up Finance goals
Having a plan for your money doesn’t just help you right now, it gives you vision and hope for the end goal. After laying out your current financial situation, it’s advisable to determine whether it aligns with your priorities. Personal finance management is made much easier when you define what you would like to achieve with your money through a viable budget.
You Must Create A Budget. Stick To It.
For a number of people, budgeting their income is never a problem until it is time to follow through. This is because not everyone has the self-discipline to limit their purchase, while to some it is too restricting to plan to spend in advance. Creating a budget in personal finance helps you allocate your money in accurately needed percentages to meet your goals. When creating a financial plan, remember that your budget is the foundation on which it all stands.
Time To Get An Emergency Fund.
In your budget, it is important always to leave out some savings as an emergency fund especially if you are not on any insurance.
This is not to say that if you have insurance, you don’t need an emergency fund. It just means that your insurance coverage is there to save you if the emergency fund is not “buff enough.”
For those without insurance, they are as good falling off a plane without a parachute. They need it. A lot of it.
The best way to create this fund is to include it in your budget. How much you save can depend on how much extra money you have available, but it is advisable to put aside at least 10% of your income into emergency savings.
If you never want to worry about not having enough in your emergency fund, back it up by getting insurance.
Most Importantly, Pay Off All Debts.
Imagine a world where debt magically disappears. Yes, imagine, because it is definitely not this one we live in.
Paying off debt is a major step towards successfully getting it right with your personal finances. It clears the slate and helps you start afresh.
Debt is a huge obstacle when it comes to reaching financial goals. Eliminating it should also be of major priority. Start with setting up a plan for payment. Small payments first. Look for areas in which you can cut your budget to increase the cash available for your debt payments. Once you are totally out of debt, you have to always make it a habit to always stay out of debt.