There has never been a better time to manage your finances. Financial experts suggest that the most opportune time to organize your finances is at the start of the year. This usually coincides with the period when people formulate New Year resolutions. Let financial management be at the top of your checklist for this year. Most people think financial management revolves around figuring the best budgeting technique. However, this is just one part of the process. You need to think about prioritizing your expenditure and mapping your current finances to effectively manage your finances.
Here are some tips you may want to consider to help you manage your finances.
Evaluate your current financial status
To develop the best management strategy, you need to figure out how much you have in the first place. To go about this, you need to come up with a financial plan featuring your cash flow, income, savings, and investments. Everything that brings you money and takes out. Don’t rush to hire a financial planner for this. Take your time and note down all your revenues and expenditures. You may find yourself surprised by what you are writing.
Experts suggest that to get everything in check, it is best to retain all your receipts through the month, covering expenses outside the major billings such as utilities, rent, or even debt payment.
Set personal priorities and financial goals
Once you have your income and expenses squared out, you now have to focus on your preference and priorities. For instance, you can opt to make meals at home instead of going out for dinner or ordering take-out. The money that could otherwise be used for eating out can be redirected to serve other purposes within the house, for example, pay for repairs.
Another thing is setting a financial goal. Setting financial goals has always been a great motivator for financial management. This move, however, needs utmost discipline. You have to define what you hope to achieve with the money saved. This way, you can easily make your budget.
Create and stick to a budget
Various budgeting tools can help you designate your monthly income without much hassle. The only challenge to this is sticking to the well-laid down budget plan. Just like in setting financial goals, you need to apply a high sense of self-discipline to see this through. This way, you can limit impulse buying or even over expenditure. One motivating factor is that, by sticking to your budget for a given period, you will be able to spend the extra cash on items that matter to you.
Create an emergency fund
Setting aside funds for emergencies, crises, or an unprecedented event is also part of managing your finances. Some of these funds can go towards covering expenses such as illness, job loss, or even house repair. Experts encourage people to set aside funds capable of cushioning them for at least three to six months in the event of a crisis.
To do this, you need to create a savings account within your budget. The funds set aside highly depend on the amount of extra cash you have. However, financial experts suggest that it is best to set aside at least 10% of your income for the emergency fund.
Avail of your car insurance
A car insurance policy generally works on a use or lose it principle. To avail of your insurance, you need to keep up with your yearly premium payments. Going to claim an insurance payout after an accident usually has two possible outcomes, you can either lose or get paid. However, the insurer can award you a No Claim Bonus which ranges between 20% and 50% of the premiums paid between the first and sixth year. It is for this reason that experts advise car owners to avoid claiming minor damages to their vehicles.
By availing of your insurance, you will be able to save on your protection and receive a bonus. That way, you will have extra cash to spend on other things such as repairs on the vehicle itself.
Pay off your debts
Accruing debts can greatly interfere with your financial plans. Most debts come with huge interest fees that can cause a huge dent in your finances. Experts suggest that you can consolidate high-interest credit cards into lower-interest loans or credit cards to enable you to settle the debts much faster and probably lesser. This move can, however, only work if you decide to live within your means. Another working strategy is concentrating all your extra earnings on clearing your debt till everything I paid off.
Save for retirement
Without a proper personal finance management plan, you may find it difficult to retire when you want to retire. Most social security services only offer up to 40% of your income upon retirement, with most employers not providing pension schemes. Set up a 401(k) account to save for your retirement. Most of the payments can be deducted directly from your income.
