5 PERSONAL FINANCE TIPS

These five tips will help you get your finances back in order and help you adopt some of the skills of financial organization into your daily life.

5 TIPS FOR ORGANIZING YOUR PERSONAL FINANCES

1. ORGANIZE YOUR BILLS

You’d certainly be surprised by the number of people who keep no track of their monthly earnings and expenses. They simply spend as much as their card will allow them, and when they can’t do it any longer, they enter the overdraft.

Only when that happens, do these people realize that the interest banks charge is very expensive, and it can snowball into a small debt in a matter of months. Due to how fast the interest rates pile up, getting out of this scenario is much more difficult than getting yourself into it.

To prevent this from happening, make a budget spreadsheet and list all your monthly expenses, starting with essential bills to superfluous ones. Once you’ve jotted that down, add the weekly bills, such as going out with friends or kids, meals out, and more. Be very thorough about this, without missing anything. This will help you visualize where your money is going and what you can do to manage your income a bit better.

A person may realize that if they stop ordering food online every weekend, they will have already saved an incredible amount of money. Even if the total may seem insignificant at the end of the month, it can pile up for the duration of the year, and then you’ll see all the money you’ve wasted.

2. CUT THE UNNECESSARY SPENDING

When analyzing the spreadsheet you wrote up, a very important thing to do is separate necessities from superfluous expenses. Essential items are those which we absolutely need in our day-to-day life. This includes things like food, housing, insurance, education, transportation, communications, water, electricity, clothing, and the very minimum amount of leisure.

Superfluous items, however, are those you can pass up on most of the time. You can take lunch to work instead of eating out every day. You can maybe find a cheaper television and internet plan. Instead of going to the cinema every weekend, you can opt to stay home with friends and watch it in the comfort of your home instead.

This differentiation between essentials and superfluous is what allows you to find ways to make cuts in your budget. Oftentimes, we “spend without seeing it”, as most of us use our credit cards indiscriminately. If you want to get your finances in order, you’ll want to prevent this from happening. Before buying anything, make out whether it’s really the right time and if you even need that purchase right now.

3. SAVE PART OF YOUR INCOME

This is an excellent tip because organizing your finances requires you to spend less than you earn. While this sounds like a no-brainer, ideally, you’ll want to save something between 20% and 30% of your monthly income.

As more difficult times are approaching, you may choose to start with a smaller percentage, but even then, the most important thing is that you start saving as soon as possible. With that amount, you should begin working towards an emergency reserve, one that could last you around 6 months of living without an income.

Remember that an emergency fund should only be used in a legitimate emergency. At times, this can be personal injury or an unexpected expense, but sometimes it’s just some home repairs you’ve been putting off for a while.

Additionally, when someone becomes unemployed or enters a financial crisis, the financial reserve prevents them from taking on additional debt. This is why you should make use of the time when your finances are in a good spot to build this reserve.

4. IDENTIFY YOUR PURCHASE MOTIVATIONS

What makes you spend? Status, power, social recognition, admiration from friends, vanity, compulsion? If you catch yourself spending too much, you may want to find the real reasons behind your overindulgence and treat them correctly.

Don’t buy the things you don’t need. When you feel tempted to change your cell phone for a newer model, for example, remember how many hours you had to work to pay off the previous one. You’ll realize how nonsensical it’d be to buy a new phone while having a fully functioning one. 

If you can’t stop yourself from spending on pointless things, consider leaving your card at home. Set aside an exact amount of money that you’ll allow yourself to spend that day, and leave the rest in your account. Also, another cool tip to take note of is making strict shopping lists that you’ll stick to when shopping.

If you’re having a tough time managing your compulsive buying issue, you may want to consult a professional. Either way, buying something as a remedy will only prolong the problem you’re dealing with, and soon you’ll catch yourself overindulging once again.

5. HAVE CLEAR GOALS AND FOCUS

Set goals and objectives for your life and focus on achieving them. Regardless of whether you want to take a vacation, buy a car, get a specialization, or anything else; just know that all of these require a solid financial plan to work.

Committing to your finances is another way to stay motivated because once you’ve seen the results of your effort, you’ll want to press on even more. In addition to this, having a more constructive purpose in our lives helps us “hold back” that urge to buy pointless items.

Finally, one last golden tip to make your wishes come true faster is to study investments and their intricacies. Contrary to what many people think, investing is not just for rich people. When studying investments, you’ll find numerous options as safe as savings, but also those that may be much more profitable, albeit slightly riskier.

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