Finance

3 Fundamental Steps to Manage Your Finances

by Benjamin Roussey|Posted on | 3 minute read | Advertiser notice
money management

Money management refers to planning your money and liquid finances so that you can make the most of it. It typically involves saving and budgeting money, investing in future, and reducing or avoiding debt. Here are three fundamental steps that will help you gain more control over your money.

1. Assess Your Current Position

Money management is not just about making the math work. You need to adjust your mindset too. You need to take stock of your current position.

  • Have you been overspending frequently?
  • Do you have enough saved to tide you over a rainy patch?
  • Are you consistently living paycheck to paycheck?
  • Does financial jargon overwhelm you?

Don’t lie to yourself. You need to be prepared to face your weaknesses. There may have been a few missteps in the past. You don’t have to continue with those mistakes in the future. Be determined to undertake bold corrective measures.

2. Create a Financial Blueprint

Before you can put your plan into action, you need to create a blueprint that works for your finances. Use these steps:

Budget

Start with a budget. Choose a system that you know is easy enough to stick with. Most people find the 50/30/20 budget plan simple enough. You need to allocate 50% of your income to needs, 30% to wants, and 20% to debt repayment or savings. There are plenty of budgeting options to choose from if this doesn’t work for you.

Track your expenditure

You can have a better idea to where your money is going by tracking expenses. You may not spend so much on a certain category. Or, you may adjust your expenditure so that it aligns better with your goals during times of serious inflation and high gas prices.

Save

You will find various avenues to save and invest once you pay attention to your finances. You need to make long-term changes by tweaking daily habits and negotiating your spending. Ideally, money saving should become a part of your lifestyle over a period of time.

Separate your accounts

You should have designated and different accounts for savings and spending. A terrific way to manage your money is to keep money for bills and budgeted expenses in a designated account. This should be separate from your emergency fund. You will be less likely to blow up your rent money on a night of binge drinking with friends. Keep your savings in separate accounts if you are looking to vacation, purchase a house, or a new car.

Pay off expensive debts

An integral part of money management is creating a plan to pay off debt. A strategic approach will help you reach the debt-free finish line quicker. You need to tackle the most expensive debt first. These are the ones with the highest interest rates. Keep making minimum payments on the rest. Work your way down till all debt is paid off.

Build your credit score

Your credit determines the rates you get loans and other borrowings on. You can enhance all aspects of your financial life by developing good credit habits. Credit checks are common whether you are getting an apartment, car insurance, or a cell phone plan. Focus on the two biggest influencing factors – credit utilization and payment history. Make sure you pay everything on time. A single missed payment can affect your score.

Think about your financial future

It is never late to invest in your future. Set money aside in IRA or 401(k) now. The compound interest will work its magic. After all, the ultimate goal is to achieve long-term stability and financial freedom even in times when policies from the government seem to be working against you and everyone else.

3. Save, Invest, and Reduce Debt

Money management doesn’t just consider your expenditure. You need to have saved enough to live comfortably in both short-term and long-term. These are a few steps to achieve financial prowess:

Start saving now

Start building your emergency fund by socking away anything extra. You should ideally have 6 months of living expenses in case something unthinkable happens. You don’t need to start large. You can always start small. Work towards a $500 reserve goal as a starting point.

Invest

Nobody created wealth by savings alone. You need to invest and beat inflation to live comfortably in the long-term. You should consider contributing to 401(k) to set yourself up for retirement. Get the maximum contribution if your company offers a match.

Pay off outstanding debt

You probably have obligations whether it is a looming credit card bill or a loan. Make sure you never miss payments. At the least aim for minimum monthly payments. Pay off high-interest debt first if you have any extra money for bills.

Finance

6 Benefits of Budgeting Your Finances

by Benjamin Roussey|Posted on | 3 minute read | Advertiser notice
budgeting your finances

Budgeting is non-negotiable when you want to manage your money judiciously. While budgeting is not perfect and will not solve all your financial woes, it is crucial to have a healthy financial life.

Many people mistakenly assume that budgeting is something you do when you are strapped for cash and living paycheck to paycheck. Not quite, budgeting can actually help even when you are making a significant amount of money. It can help you make the most of every dollar and enable you to save money that you would not otherwise be able to.

Prevents You from Overspending

Failing to plan for your financial well-being can make you susceptible to overspending. If spending is a problem for you, start working with a budget. When you know how much money you have coming in each month, you can see if there are any areas where you’re overspending without realizing it.

For example, when you put together a monthly budget, it might become clear that there are extra monthly charges on your credit card bill — maybe because of subscriptions or memberships that could be canceled without affecting your life too much. Using a budget to help direct your spending will ensure that the majority of your paycheck is applied towards paying off debt rather than simply being used on a whim.

Helps with Long-Term Savings

Saving for the future is an admirable goal that most of us have at some point. When you know exactly where your money is going each month, saving for more significant expenses like vacations or down payments on homes becomes easier. You can also set aside money for emergencies or unexpected costs that might come up during the year — like car repairs or medical bills — without having to rack up credit card debt to pay for them.

Makes Saving Easier

Today’s lifestyle makes it hard to save money because so many temptations and luxuries get in the way of our goals. People without a budget tend to spend more than they earn. By finding multiple areas where you can cut back, you’ll have more money to put away in savings.

You can have your money automatically withdrawn from your checking account into an investment plan or savings account. You will eventually achieve your financial goals by consistently saving a portion of each paycheck which is awesome during these high inflation times.

Offers More Flexibility

The great thing about budgeting is that you don’t need an exact idea for every expense when it comes to financial planning. If you only have a ballpark idea of your finances, you can develop a budget to help guide your decisions in the coming weeks and months.

There’s no reason to wait until you’ve got everything figured out to start working toward your goals—you can develop a budget based on your best guess and factor in any changes as they occur. It’s not going to be perfect, and that’s okay.

You can adjust your budget as new information comes in and as your circumstances change. The important thing is that you have a budget—it helps ensure you’ll be able to stick to your plans, even if some details are flexible.

Accelerates Your Financial Independence

Many people get frustrated with budgeting because they see it as a chore, but it is really an exercise in setting and achieving goals. When you start thinking about your monthly goals within the framework of budgeting, you can more easily set effective budgets and reach those goals faster.

For example, one of the most common financial goals is to save up to buy a house. To accomplish this goal, you first need to set a specific dollar amount that you want to put towards buying a home every month. Then, you need to create a spending plan for everything else in your life so that when it’s time for you to put money towards your house fund, there are no holes in your budget which is critical when gas prices are so unappealing.

Gives You Greater Control of Your Money

It’s easy to feel out of control with your spending when you don’t know what you have available. You can bury your head in the sand until it’s too late, or you can put a budget into place and make a plan for your financial future. To plan properly, you need to know what is going on with your money today.

Budgeting lets you see your income, spending, and expenses on one simple number. Once you have this number in hand and can see where your money is actually going, you’ll be able to easily adjust your budgets and expenses as needed to get more of what matters most out of life.

Finance, Money

5 Things You Must Know to Take Control of Your Budget

by Benjamin Roussey|Posted on | 3 minute read | Advertiser notice
Control of Your Budget

Managing your finances can be extremely rewarding, but also challenging. If you’ve never tried to budget before, then it can be hard to figure out how to make it work for you. That’s because many factors affect your budget, which can seem quite complicated. But once you break out of old habits and learn to focus on the things that matter most, it’s possible to have fun with your money and save up at the same time. Below are some tips for mastering the budget game.

Know Your Numbers

The first step in budgeting is figuring out where your money is going now — and what you can cut back on. You can’t control your money if you don’t know where your money is going. Start by tracking your spending for a month or two so you have an accurate picture of your income and expenses. You can do this manually, like write everything down in a notebook or use free apps to help keep track of your spending and see what areas of your budget need tweaking.

If you get paid weekly, write down each paycheck every time you get one — don’t wait until the end of the month to do it all at once. This is especially important if you have an irregular income. If you only get paid once per month, once per quarter, or something similar, then write down each payment along with any other transactions. You’ll also want to ensure you’re getting the most out of any credit cards or rewards programs.

Set a Goal for Yourself

Once you know how much money is coming in and going out each month, set a realistic monthly savings goal. For example, if you want to save $500 per month, then plan to spend $500 less than what comes in each month, assuming there are no unexpected expenses.

If possible, try to set aside extra monthly money, say $100, which goes straight into savings without being touched until the next month rolls around. This will help build up your savings account quickly without taking away from other priorities like paying off debt or contributing toward retirement accounts.

Set aside Sinking Funds

A sinking fund is an accounting measure used to allocate funds for an ongoing project. The money is put aside for a specific purpose, such as paying off debt or paying for something in the future. It allows you to set aside money always to have it available for your project. They can be used not just for savings purposes but also for working towards a specific goal, such as saving for college funds because society spends enough on K-12, it just cannot afford to pay for peoples’ college pursuits.

The alternative approach would be to put extra money towards the debt monthly, but in practice, this may not happen because people overspend their normal limits and have nothing left to add to their debt repayment plan. A sinking fund is a way you can pay down your debt and have extra money built up in reserve if you ever fall short on funds which can happen in a high gas costing, inflationary environment.

Anticipate Irregular Expenses

We set budgets for the many things we purchase throughout the year. But one of the most critical areas to budget for is irregular expenses. Inconsistent expenses are just that – not every month or six months, but only once a year, such as saving for festival gifts, vet visits, or medical check-ups.

It is essential to plan for these as they can seriously impact your cash flow and should not be overlooked. Forgetting to add these into your initial budget could make a difference between having money in your account and not.

Automate Money for Savings

Saving money can feel like a challenge. It’s hard to remember to do it every day and don’t even think about saving in between paychecks or on paydays. By automating your savings, you can ensure that you’re saving and setting money aside for emergencies or larger goals like retirement. Saving money on an automatic deposit can seem daunting at first, but once you get into the routine of saving on auto pilot, it becomes second nature. Once you’ve taken the first step of linking accounts and setting up automatic deposits, all that’s left is sticking to it and ensuring that each account has enough money in it so that transactions are completed successfully and without error.

Finance, Lifestyle

Best Practices to Take Control of Your Personal Finances

by Benjamin Roussey|Posted on | 3 minute read | Advertiser notice
Personal Finances

You could win the Powerball jackpot and still end up broke simply because you did not manage your money well. You could also be earning a huge salary and find that most of the money’s gone before the month is out, leaving you strapped until the next paycheck (Allen Iverson almost knows about this – as do many others). That’s why it is good to be proactive and take control of your finances instead of asking yourself where the money went.

Here are 10 prudent tips to help you manage your personal finances effectively.

Set up separate bank accounts

You must set up a savings account and a checking account as soon as you land a job. Keeping your salary in these 2 accounts will ensure that you only spend the money from your checking account leaving the savings account intact for future goals.

Save first, spend later

Make sure that you have set up automatic withdrawal and deposit on the same day that you get paid. The deposit might go towards a retirement fund or an emergency fund. Do not miss out on the retirement plans offered by your employer (even the US military has TSP). What is important is to not wait until the end of the month to make that saving. Your spending budget should not take your entire income into account. Automatically moving a percentage of your income first will make sure that you can only access the spending money you have allocated in your budget.

Set up short and long-term financial goals

It is always best to set specific goals, for instance, do you want to buy a property when you reach a certain age? Do you have a clear idea of how much it will cost, even if it cannot be an exact figure as land and property prices can fluctuate? Then, count backwards to calculate the amount you will need to have on hand when that time comes and start saving. It will help to write your goals and the saving plan and place it where you can see it regularly.

Budget

Make a budget and stick to it. This is an important step to take if you wish to be in charge of your finances. When you list down your monthly expenses, you will find that it helps to know the bills that are to be paid routinely and the amount that is left over for saving, investing, or extra spending. This is vital when taxes and costs for goods are increasing because of new policies.

Monitor your spending

Once you know your monthly income and your budgeted amount for monthly bills, you will have a clear picture of how much money you can spend. This requires careful monitoring because it is way too easy to spend money thinking that you can just because you have paid all your bills. This will also help you see if there is an expense you can do without.

Live within your means

It is frugal living that fattens your bank balance. When you understand that you are not deprived of anything by living within your means, you will also realize that it is pretty easy to maintain a lifestyle that takes care of your needs without going overboard.

Set aside money for emergencies

Set aside some of your income each month towards emergencies. If there are no emergencies, you can be happy with the fact that you have saved a lump sum. If there is an emergency, you won’t have to panic and wonder where you will get the money from.

Educate yourself

You would do well to keep abreast of the latest tax laws to make sure that you maximize your savings. Keeping yourself well informed of the stock market and following the financial news will allow you to find safe investment opportunities.

Go for the discounts

There is no shame in looking for discounts and taking advantage of the offers made by retailers. If possible, take a more direct approach and master negotiation skills by working with small businesses. It can be a win-win for the business and you. Buying in bulk could get you a discount just as much as a long term relationship with a vendor. The idea is to avoid wasteful spending.

Take care of your health and property

Health – The body can throw in a lot of surprises along the way. It is best to be self-aware and maintain a healthy lifestyle. Make sure that you schedule regular doctor appointments, including dental care. Eating right and exercising will also keep you away from avoidable health risks.

Property – Regular upkeep and careful handling of the things you own, big and small, can shave a lot of repair costs from your monthly expenses. This is a great habit to cultivate and will also teach you to value what you own.

Regardless of how much money there is to manage, these tips can help you stay on top of your spending and saving, and leave you financially secure.