Many people find the topic of financial management to be completely overwhelming but don’t allow yourself to get discouraged and disheartened.
No matter what your personal financial situation looks like today, one of the best ways to successfully manage your money is to adopt a continuous and proactive commitment to improvement.
Even the most financially savvy individual can become confused and make shortsighted decisions. Try not to focus so much on the big picture or how far behind you are as you will only get discouraged. Instead, focus on what you can do to improve your situation today!
Taking action right now encourages you to make better financial decisions going forward. The snowball effect puts you in a much better financial situation than you ever thought possible.
To help you along in your financial journey, we have listed some steps to help you successfully manage your personal finances. By following the steps below, you can quickly reap the rewards of lower debts, higher savings, and an improved credit score.
Determine Your Long-Term and Short-Term Financial Goals
The first place you should start with personal financial management is establishing goals.
Without a comprehensive a detailed list of goals, you will not have the right level of motivation needed to make necessary changes.
Write down all of the financial goals you can think of, both long-term financial goals, such as purchasing a piece of property, or retirement, to less significant short-term goals, like taking an international vacation or paying off credit card debt.
Everything from homeownership to improving your credit score ultimately depends on your ability to better manage your personal finances. Once you have written down your financial goals, you can start to prioritize them. Impulse purchases start to seem irresponsible when you have important and specific financial goals in mind.
Consider listing your goals in the order you would like to achieve them. Long-term goals require a consistent approach whereas short-term goals can be treated almost like a reward. When you reach them, they really boost your confidence.
Completing certain goals helps you accomplish others. For example, becoming debt free makes it easier to save for large purchases like a down payment for a home.
Create a Comprehensive Budget
Creating a budget you are willing to commit to is one of the best ways you can ensure you are managing your personal finances properly.
Sticking to a spending and savings plan allows you to control your money in ways that help you accomplish your financial goals.
Write down how much money you are taking in through your salary, bonuses, benefits, and other sources. Compare that to all of your expenses and make sure you have enough to cover everything. From there, divvy up your leftover money into various savings and investment accounts earmarked for particular financial goals.
You should make your budget as detailed as you feel you can comfortably stick to. The key is to make sure it is something you will actually commit to. As long as you are making the right moves to pay off your debts, create an emergency fund, and save for the future, you can get as creative as you would like.
A budget also helps calm your nerves if you have any sort of financial stress. Knowing exactly where your income is going makes it clear how your financial situation will look in the coming months and years.
Do not be afraid to treat yourself. A budget does not have to be completely void of fun. Make sure you are still budgeting for a social life, entertainment expenses, and any hobbies you may have. If you complete an important financial goal, you can always treat yourself with a fun splurge.
Pay Off High-Interest Debts
Debt can create a vicious cycle that is hard to break, especially if that debt carries a particularly high-interest rate.
You should make eliminating debt a priority in your efforts to manage your finances. Consider setting up a debt removal plan. Rather than making minimum payments on all of your debts, set aside extra money towards one debt with the aim of paying it off completely.
Focus on debts that have a low balance and carry high interest. Once these annoying debts are out of the way, you free up money to tackle your larger debts. Move all of the money you were paying on previous debts towards paying off the next.
Once you have finally paid everything off, make a commitment to yourself to stay out of debt. Rather than relying on a credit card for emergencies, save up an emergency fund for unexpected expenses.
Trim Daily Expenses Where You Can
Identify areas where you can save money. Take a look at how much you are spending on various bills and find areas where the cost can be reduced.
When it comes to reducing monthly payments, one place to start is writing down all of your recurring bills. Decide which you can do without. Unused gym memberships, rarely used television cable packages, and expensive music streaming services are all bills you might reconsider when you notice how much they cost annually. You can also search for better deals on your cell phone and Internet plans.
Food is another daily expense that can almost always be cut with the right approach. If you eat out at restaurants and order expensive take out on a regular basis, you should reconsider. Home-cooked meals are almost always cheaper to make. You can also consider packing a lunch for work rather than eating out.
Reconsider the mindless small purchases you make on a daily basis. Many people think nothing of a $3 coffee on their way to work; however, that $3 starts looking quite significant when you add up how much it costs over an entire year.
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