5 Personal Financial Management Tips That Will Change The Way You View Money

5 Personal Financial Management Tips That Will Change The Way You View Money

Wouldn’t it be life-changing if there was a magic formula that allowed you to be financially free ASAP? Like an “ABRACADABRA” of money? If you are among the large portion of Americans struggling with finances, having a sound money management plan can be a light at the end of the tunnel.

Tips-To-Manage-Finances

Here are some tried-and-tested strategies to help you achieve financial freedom.

5 Actionable Steps for Managing Personal Finances

1.      Evaluate Your Current Financial Situation

Before you start managing your finances, you need to understand where you stand. How much money do you have? Do you have any debts? Make an inventory of your cash flow, income, savings, and investments. Save receipts for a month to determine how much money you spend on bills like utilities, rent, and debt payments.

2.      Define Your Financial Goals

Do you want to invest in property? Take a month-long trip to Europe? You probably want to retire early or start a family. If you’re going to have all these things you dream of, you should make the necessary adjustments to your finances. [1]

Once you have everything on paper, proceed to prioritize them. Listing your goals in order helps you to pay attention to the most important of them.

Here are some tips to give you clarity on your financial goals:

  • Have long-term goals like getting out of debt, retiring early, or buying a home.
  • Set short-term goals like saving for a decent date-night, decreasing your spending, and following your budget.
  • Prioritize your goals to help you develop a financial plan.

3.      Develop And Stick To A Budget

Are windshield wipers necessary in the rain? Yes, and so is having a budget, even in the middle of a financial storm. Many people don’t have trouble creating a financial plan according to their incomes, but sticking to it is often the issue.

The trick is to be detailed when writing the figures. Also, celebrate small wins because it’s the little efforts that get us to the finish line. For instance, reward yourself when you pay off a debt or stick to your budget for three months in a row. 

4.      Pay Off Debts

Harboring debts is a massive hindrance to attaining your financial goals. Considering that most debts accrue interest, becoming debt-free might take forever if you only make the minimum payments. Consolidating high-interest credit cards into a lower interest loan or line of credit will help you become debt-free much sooner.

You can also consider paying off a debt at a time, otherwise known as the snowball effect. [2] Once you are out of debt, commit to reducing your borrowing levels. If you are often tempted to use your credit card unnecessarily, you can leave it at home.

Consider these tips to help you clear debts more quickly:

  • Take a second job to earn more money for paying off debts
  • Sell unused items in your home and use the extra cash to repay debts
  • Cut off unnecessary expenses from your budget to increase your available cash

5.      Set Up An Emergency Fund

Part of better money management is to set aside cash for unexpected expenses like illnesses, loss of income, or a major house repair. While this might seem cliché, everybody needs an emergency fund to finance their lives for three to six months.

The best way to set up an emergency pot is to include savings in your budget. The amount you can set aside depends on the available extra income. However, it’s always a good idea to save at least 10% of your monthly revenue.

The Best (Free) Websites for Managing Your Finances

Sticking to your budget can be tough. Thankfully, these sites will help you get out of debt, pay your bills and track your expenditure.

  • Mint

Not only is Mint free, but it is also highly comprehensive and user-friendly. You can create dozens of categories and connect them to your account to track payments automatically. Mint allows users to track the progress of their financial goals, whether it is saving up for a trip or paying student loan debts. [3]

  • LearnVest

The all-in-one financial website is aimed at empowering women to take charge of their finances. It helps users to get informed and organized. With a range of tools, courses, and experts tailored to your life’s situation, LearnVest enables you to achieve your financial goals. You can access their articles on current economic events, the best credit cards and accounts, and frugal living tips. [4]

Conclusion

You don’t need a significant investment portfolio or be an expert in personal finance to become financially secure. If you want to have a better grip on your finances or get out of a financial predicament, there is no better time than now. Remember to research further, as these tips are a starting point.

  1. Forbes. “5 Essential Tips To Reach Any Financial Goal.” January 29th, 2021. https://www.forbes.com/sites/melissahouston/2020/10/27/5-essential-tips-to-reach-any-financial-goal/?sh=5957e986b7f8.
  2. Investopedia. “Debt Avalanche vs. Debt Snowball: What’s the Difference?” January 29th, 2021. https://www.investopedia.com/articles/personal-finance/080716/debt-avalanche-vs-debt-snowball-which-best-you.asp.
  3. Mint. “It’s all coming Together.” January 29th, 2021. https://mint.intuit.com/.
  4. LearnVest. “Life& Money.” January 29th, 2021. https://learnvest.com/