Far from being set in stone, your personal finance best practices will change as your priorities evolve and your career progresses. Still though, for most people, sound money management is all it takes to improve their abilities to reduce spending and save more. Effective management of your personal finances begins with cultivating a sense of financial literacy. Understanding concepts such as personal loan consolidation and investment strategies can be helpful in this regard as well.
In this article we will take you through some of the best practices in personal financial management. The information herein can help you avoid a experiencing a never-ending parade of debt resulting from poor financial decisions.
1. Develop a Financial Calendar
In between maintaining your career, family, and social life, it is easy to forget important money to-dos such as paying your quarterly taxes or reviewing your credit report. You can avoid this by creating a financial calendar that reminds you to do these things.
A well-maintained financial calendar will also help you highlight the high and low points in your monthly finances. This can help you better manage the ebbs and flows of your monthly income.
2. Track your Spending
Key to managing your personal finances effectively is learning how, what, when and where you’re spending. This awareness is the initial step to sound money management. There are a number of money management applications that can help you accomplish this. Some will even help you pay your bills. These can help you monitor your spending across essential and non-essential categories like rent, food, and entertainment.
3. Create a Monthly Budget
Getting a handle on your monthly spending habits will help you to a realistic budget within which you can live comfortably—and maintain. Your budget should not mandate draconian changes. It should fit well with your lifestyle, while helping you trim non-essential spending. For instance, declaring that you’ll never eat out again when you’re currently ordering takeout seven times a week is unrealistic.
A reasonable budget will encourage better spending habits, such as cooking more at home and spending less in diners and on takeout. A budget is only good if you’re able to stick to it. Leaving yourself room for little treats here and there will help you accomplish this. For example, you can reward yourself for sticking to your budget for three months straight or paying off a debt in full.
Toward this end, couples should also make sure they’re of an accord when it comes to budgeting. The more you work together, the better your chances of success.
4. Eradicate Debt as Quickly as Possible
Managing debt can be costly, especially when you have multiple financial obligations to meet. The escalation of interest charges, particularly on credit card debt, can make you feel like you’ll never be debt free.
However, there are tools to help you accomplish this.
Personal loan consolidation is an effective strategy for paying off debts faster. This strategy entails combining multiple debts into a single monthly payment. Creative techniques such as the debt avalanche and snowball methods have proven to be reliable approaches to eradicating debt as well.
5. Create an Emergency Fund
Setting aside enough cash to cover three to six months of your basic expenses will serve you well in the event of a job loss, or some other large unanticipated expenditure. This can be in the form of a savings account, or some other readily liquidated asset. The idea is to have quick access to this cash to prevent you having to rely heavily on credit in such an instance.
6. Implement a Savings and Investment Plan
Once you have your debts in hand, the next step is to create a savings and investment plan. The whole point of cultivating good personal finance habits is ensuring you have the ability to save and invest for your retirement years.
