Do you know the best thing about managing your personal finance? The feeling of having control over your life. Managing your finance means you’re working for your present and future. Many aspects of your life would be so much better once you get your personal finance all sorted out.
But, not everyone knows how. Some are even too afraid to try because of how confusing and difficult it is. Well, I am not blaming them, managing personal finance can look and sound daunting for people who’ve never done it.
But it doesn’t have to be like that. Managing your finance should be as easy as how you want it to be. And that’s exactly what I want to talk about in this article.
Budgeting is the first thing that you want to do. It is a great way to take a deeper look at your financial situation. And budgeting means that you’re also finding out about your income and expenses.
The basic of budgeting is simple: putting aside some money for various needs, such as monthly expenses, luxuries, savings account, and emergency situations. With a budget in place, you’ll know exactly where your money is going and how much you can spend.
Set aside 20% of your income for financial priorities
Sometimes you have no choice but to use your money for specific priorities. And to save you from the headache of calculating how much money you need, just use the 20% rule. Set aside 20% of your income for financial priorities.
These priorities could be paying off debts, emergency savings, important expenses, and retirement funds. Feel free to increase the amount if you think you can afford to.
Paying off your debts
If you have debts to pay off, then you should take care of them first. Otherwise, you’ll be hindered by the interest rates alone. First, find out which debts have the highest interest rate. Then you can focus on that debt first.
Putting aside more money for paying off your debts is a sacrifice that you have to make. Always focus on paying off your debts first. This is just the reality that many people have to deal with. You don’t have any leeway when it comes to paying off debts. But once, your debts are all paid off, you’ll have a lot more room for your money.
Set aside 30% of your income for lifestyle spending
Just for emergency funds or other financial priorities, you need to set aside some money for lifestyle spending. 30% is a good number for your lifestyle to prevent overspending. This spending may include movies, restaurants, car payments, a new phone, etc. Basically, anything that makes you happy and is not part of basic necessities.
Create specific financial goals
People are saving their money for many different reasons. So what are your reasons? By answering this question, you can get a clearer image of your future goals and more motivation to do so. This will also help you create a budget for monthly expenses.
Smaller financial goals
Let’s think about what you want today or tomorrow. Are there specific things that you want to buy? Smaller financial goals are also important to make sure you aren’t overspending and are still happy. Create a plan for one small financial goal, and make sure it is aligned with your budget for the month. Being able to work toward your smaller goals could make you feel like you’re in full control of your life.
If you are working toward a bigger goal – let’s say for a decade from now – then you’ll need to invest your money. Simply saving your money isn’t enough at all if you want your money to keep growing. Investing, however, should be done carefully.
There are many ways to invest your money, such as real estate, long-term deposits, stocks, and many more. As long as you know what you’re doing, investing your money will always contribute positively toward your long-term goals.
I can guarantee that managing your personal finance well will make you feel good. The more you’re doing it, the more motivated you to keep doing it for many years to come. And it is always a good idea to be responsible with your money.