Whilst most people would agree that finding a higher-paying job would be the solution to their money problems. For many, adopting new habits is all it takes to improve their finances. Without properly managing your finances, you’ll constantly find yourself in a financial hole you need to dig yourself out of.
Having your financial affairs in order brings about a sense of security and ease. If you’re looking for ways to manage your finances, here’s a list of five to get you started.
1. Assess where you stand financially and where you’d like to be
Without an understanding of your current financial status, it’s hard to come up with a solution tailor-made for your financial problem. Make a list of your income and expenditure in a notebook or create an MS Excel spread-sheet — (use your bank statement to obtain this information).
Your list should include:
· Income
· Monthly expenses such as rent, food, utilities, debt repayment, interest rates and any form of payment you make monthly.
· Savings and investments.
By doing so, you create an awareness of your current financial affairs and where you need to adjust.
For example if you’re spending more on dining out, you might want to cut that expense and start having home cooked meals instead. You’ll have extra money to channel towards your savings.
Having a clear picture of where you’d like to be financially also plays a role in helping you manage your finances. Without well-defined goals you become susceptible to impulse buying and unaccountable for your spending habits.
Set clearly defined, realistic, time-bound goals.
(Note: Ensure your goals are realistic otherwise you’ll lose the motivation to follow through if they’re unrealistic. Setting a timeline gives you a sense of urgency towards their accomplishment).
Divide your goals into short-term and long-term goals. These can be something like this,
Short-term goals:
· Reduce spending by cooking at home
· Save for a family holiday
· Build an emergency fund
Long-term goals:
· Debt repayment
· Save for retirement
· Purchase a house
Setting clearly defined goals guides your progress toward success. It makes you accountable for your spending and gives you a sense of achievement when the goal is met.
2. Create a detailed budget
A budget is a useful tool to help you plan ahead of your spending. It gives you control over how much money you’re willing to spend in a specific area of your life. Without a clear understanding of where your money goes every month, you’ll continue to hemorrhage funds that could be channeled towards your savings.
To create a budget, you can use the 50/30/20 rule to allocate your earnings, where 50% goes into your basic necessities (such as rent, food, and mortgage), and 30% goes towards your wants (such as streaming services and dinner dates) and 20% is channeled towards your savings and investments such as (an emergency fund, retirement plan, stocks, and bonds.)
Alternatively, you can use the free version of a budgeting app such as pocketguard.com to plan your spending.
3. Build a safety cushion
An unexpected life event such as a sudden loss of employment can be financially crippling if you’re not prepared. It can lead you to debt and deter you from reaching your financial goals. An emergency fund is a pool of funds you save over time to help fund your lifestyle in the case of losing your primary source of income.
To build an emergency fund, automate deposits into an easily accessible savings account. You can do this via online banking or approach your banking institution for assistance.
Note: Ensure you have easy access to the account because when life’s unexpected hits; a delay in payment of funds is the last thing you want to deal with.
4. Pay off debt
Debt delays you from reaching your financial goals. Prioritizing debt repayment saves you from compound interest charged on the principal debt and frees up money for investment over time.
A debt repayment plan could be that you pay off expensive debt first by setting aside an extra amount each month towards that debt, thereby eliminating 1 debt at a time. Once that debt has been cleared, you move to the next one and repeat the process.
5. Create extra sources of income
Depending on one source of income in this era is not an option considering the high number of job losses. Having multiple sources of income enables you to have extra money for your child’s education, to help you pay off debt fast or simply fund your lifestyle in case you lost your primary source of income.
You can create extra sources of income by renting out a spare room in your home or finding a product to sell.
Conclusion
Are you ready to chart a course to financial wellness?
With awareness comes responsibility. If you want to achieve success, discipline is required to stay in the course of action towards managing your finances. Understand where you are financially and where you’d like to be, create and stick to a budget, build a safety cushion for rainy days, pay off debt and create extra sources of income for your financial security.
Content created and supplied by: barbaraagyeman006 (via Opera
News )
, . , . () , , , , , , , , . / , and/or . , , and/or , and/or