10 Tips to Take Control of Your Finances
For someone who is still struggling to move ahead in life, the idea of taking control of your finances can be somewhat intimidating. This is pretty much counterintuitive since you need a whole lot of self-confidence when it comes to financial decision making. Here, we are referring to the basics of money management. This includes the concepts of savings, budgeting, debt handling, credit cards, investments, and so on.
It may look impossible for anyone who’s a newcomer to personal finance, but it’s an achievable feat. Don’t get it wrong, we aren’t saying it’s easy, but you can still find a way to get on top of your finances. All you need is the desire to take control, determination, as well as a lot of flexibility. Sure, there may be setbacks along the way, but there’s no need to panic, as it can be surmounted. With that said; the following tips will help.
- Create a budget
Before you can successfully take control of your finances, you must have a budget in place. A budget is basically a plan on how to conduct your monthly expenses based on your monthly income. In fact, it is the best and most basic tool to use to take control of your financial future.
The first stage of budgeting is taking note of all income and possible expenses. Then, take your expenses away from the total income and it leaves you with discretionary spending. Once the month begins, draw up a budget so you can channel some money to your discretionary funds.
What’s more, if your expenses are more than your income, you have two choices. Either, get yourself an extra means of income or cut down on your existing expenditure. Furthermore, ensure that the revised budget is implemented consistently so you can live within your means.
- Pay down on your loan debt
Many people take Guarantor Loans without realizing that the interest rates are digging a hole in their wallets. By shelling out hundreds of dollars on a monthly basis, you may end up with little to no savings at the end of the day.
Needless to say, this depends on the interest rate, the duration of the loan among other factors. Further, you can use loan refinancing to reduce monthly repayment and also cut down on the total cost of the debt while decreasing the repayment time.
- Make a financial plan
While budgeting takes care of short term goals, financial plans cover a longer period in the neighborhood of 10, 20, or 30 years down the line. If you really want to achieve specific goals and take charge of your finances, having a financial plan is necessary. In fact, it is considered a timeline for the huge milestones you set for yourself.
Note that budgets work hand in hand with financial plans, so you can think of your budget as an element of a bigger financial plan. It goes a long way to help you with your finances by prioritizing your goals. Even more, you’ll achieve a better result if you tackle your financial goals one after the other, or in small batches. And once you have completed the first batch, you can focus on the next. Here’s a handy tip; you should never draw up financial plans without including a retirement savings account, investing in a mortgage, setting funds aside for your children’s higher education, and so on.
- Understand your expenses
If you were asked out of the blue to quantify your monthly expenses, not many people would be able to do it off the bat. You need to be able to keep track of exactly where your money goes. You’d be surprised at the number of people who are ignorant of the amount that leaves their account on a monthly basis. Let’s call a spade a spade here, if you’re in this situation the future is nothing less than bleak. The good news is that it can be easily corrected.
Make a decision to track all your monthly expenses by compiling all receipts for restaurant bills, groceries, utilities, and so on. Also, cash and credit card expenses should be tracked, then at the end of the day, check your bank statement and compile all the expenses.
The idea here is to be accountable for all your expenses, both fixed and variable. In the end, you’ll get a cumulative amount that’ll make it easy to view all expenses at a glance. Also make a clear cut plan in terms of managing your finances going forward. This record can be used as a reference over time to compare your financial performance.
- Keep the credit cards at home
You’ll be surprised at how many people are still living from paycheck to paycheck even when they earn enough money. If you fall into this category, it’s time to go easy on the credit cards. Constantly relying on these cards to make ends meet will definitely land you in debt.
At the end of the day, it will limit your disposable income, making life even more difficult. People who really want to take charge of their finances should stop making use of their credit cards.
- Automate your savings
Starting a savings account is a good idea for anyone who wants to plan for the future. Some people have taken it a notch higher by structuring their account so they can’t touch their money till they meet their target savings. This may be a bit too drastic for some people, however, the best way to ensure that you continue to save is by making the process automatic. Simply leave a standing order with the bank, so a fixed amount will be deducted from your main account and sent to a special savings account.
Note that this will only work seamlessly if you sit down and decide on an amount you can realistically survive without. Once that’s settled, you’ll be able to avoid the temptation of picking at the money; however, you can still access it in the case of an emergency.
- Grow Your money
Though savings are a necessity, it only constitutes a smaller part of the bigger picture. Saving money and letting it sit idly in your account will not add any value to your pocket. On the other hand, long-term financial security can be secured by putting these idle funds to work. Asides your base savings, get your remaining funds together, and put them in an investment account that will yield greater dividends.
More so, there are so many routes to take such as fixed deposit accounts, treasury bills, commercial papers, money markets, and many more. We could go on and on, but your best bet is to properly research all options. If you need some assistance, a certified financial expert can be consulted for guidance.
- Stop eating out
Sure, it’s exciting to go out or order in take out once in a while. But a little nibble here and there is enough to drill a sizable hole in your pocket. You need to work towards cutting down in that area if you want to control your expenses. You see, compared to throwing a meal together at home, eating out can be pretty expensive. Don’t get us wrong, indulging yourself occasionally is not a bad idea, but that extra money can go to your savings. So, try to opt for packed lunches or cook at home, for the most part.
- Ensure that all your goals are realistic
It’s all fun and games to map out a financial plan, but at the end of the day, if you can’t implement them it’s all for naught. So, you really need to think hard and ensure that your goals are realistic. Setting unrealistic goals is basically the same thing as shooting yourself in the foot. It’s a sure way to set yourself up for failure, and that’s not good in any book. For instance, a worker in the US who earns an annual pay of $30,000 cannot possibly pay off a $40,000 debt in a year.
- Read publications on personal finances
A handful of experts on financial matters have written books on financial wisdom, so it’s left to people who are lagging behind in this area to read them. There are so many nuggets of wisdom scattered across the pages of these books. As such, you’ll get everything from tips on how to build a great investment portfolio and ways to get out of debt.
Altogether, the experience you’ll gain from these books will significantly alter your approach to money management. More so, it’s really not hard to get your hands on this material; you can buy financial publications online, or borrow from your local library. Additionally, if the act of reading is a bit tedious for you, audiobooks are also available. So, there’s really no excuse not to read a book these days.
In conclusion, it is advisable to take steps in the right direction on time. Don’t wait for large financial commitments or difficulties to occur. Once you get your finances in shape, there’s no challenge you can’t meet head-on.