4 Golden Rules of Personal Money Management that you need to Know

Personal money management is all about how you manage your finance, invest your money and control your spending habits. It is something that you don’t get to learn from school but learn from your experience. It might take some years to become a pro with personal money management but learning the basics is easy. To get started, let us understand the basics of personal money management that will help you to get a groove of your money. Once you get started with the basics then you will be able to create a budget that works for you and start saving & investing money.

We share with you 4 golden rules of personal money management that you need to know for a better financial future. Let us understand how these 4 rules would help you to manage your finances in a well-organized way to leave some room for savings and investment.

Personal Finance Management

The 4 Golden rules of Personal Money Management:

Know the basics of personal money management

You would have grown up learning the basics of maths but not aware of the basics of money management. The basics are as simple as it sounds. In short, your mindset and your habits would define your financial future. Let us start with the basics first:

  • Your expenses should never exceed your income

Are you spending more than what you earn and falling in the heap of debts? Then its time to analyse your expenses and know where your hard-earned money goes at the end of the month. If you spend less than you earn, then you’ll have some money left which you can use wisely (either save or invest or do both)

  • Look for alternate ways to get more income

Never get satisfied with one income if you wish to become financially secure. You can get second income through lots of ways such as share your knowledge and take tuitions, sell your art, write reviews, blogs etc. A second income would help you to clear off debts soon, reach your financial goals faster or have more savings.

  • Start saving as soon as you start earning

The common mistake which everyone does is start saving only when retirement is nearing. If you start saving as soon as you start earning, you would end up retiring as a millionaire.

  • Spend every penny wisely

Every penny you spend matters, so it’s better you spend it wisely. Spend on the things that you need and not want, there’s a thin line between both.

  • Clear your debts before the deadlines

To avoid paying for the extra interest on the debts, clear off the debts before it crosses the deadlines.

Create a workable budget and follow it

The next important rule is to create a workable budget and stick to it. All you need to do is list down your monthly expenses and income (in separate columns). Now, separate out the essentials such as rent, utilities, phone bills, groceries etc. Analyse the rest and look for the areas where you’re over-spending. Fix an amount to spend every month based on your income and the necessary expenses. For sure, you will be left with some money to save or invest. This is how you make a workable budget.

Use the right tools in the right way

How to save money effectively- should you invest it on something or save in bank accounts? More than just saving money, it’s important to do it in the right way.

  • Look for investment options based on the risk you can afford

If you started managing your finances well, then you would be left with some savings. If are planning to invest it, then you need to know about the risks involved, profit share etc. You can invest that money in stocks, bonds etc. Before you decide on investing, know about the risks involved.

  • Pick the bank that gives you better interest rates

When you choose to save in bank accounts, it’s essential to know about the interest rates, minimum fee, fixed deposits etc. Make a list of the local banks with the interest rates they offer and then choose the one that suits your needs.

Start saving for the future, today

Don’t wait for the right time to start saving for your future. The simple motto is starting soon, save soon. When you’ve just started earning, it might look difficult to save. But even if you manage to put a $100 into your savings, it would make a huge difference in the long run.

Summing up:

Getting hold of your finances is not that easy and doesn’t happen in a day. You will notice a difference in the way you handle your finance, once you understand and follow the 4 golden rules of personal money management mentioned above.

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5 Important Steps to Shape Your Personal Finance Management

What if there was a shortcut to handle money? We all would love to get the knack of it and would never get stressed with finances. Do you have the feeling the money just slips out of hand and there’s no room for savings? Then, all you need to do is scrutinize your financial records and know how to spend your money. Remember that it’s never too late to start especially when it comes to giving a new shape to your personal finance management. There are 5 important steps that will be able to help you with handling finance in a better way and become a pro with personal finance management.

If you feel you’re not able to manage your money, then it’s time to change the way you handle your finances. We share with you 5 essential steps that embark on analysing your weak areas and shows how to improve on those areas for better personal finance management.

Personal Finance Management

5 steps towards your personal finance management:

Get rid of your debts as soon as you can

Debts should be the last thing you would want to have especially when you’re struggling with financial management. As it can ruin every plan of yours, it’s essential to get rid of your debts as soon as possible. Debts can add up in a single day but get rid of them might take years. The following steps would help you to make a debt management plan:

  • List down the debts based on the amount and interest rates
  • Start making payments towards the ones with higher interest rates and eliminate them soon
  • Make minimum payments towards the rest and follow the same hierarchy
  • Sell your unused stuffs to pay for the debts
  • A second job would also help to clear off debts soon
  • Never fall into a new debt until you clear off the old ones

Create financial goals to save for

Financial goals would keep you focused on your personal finance management and motivate you to save for something that you love or need. Your financial goal can be anything be it getting rid of debts, buying a home, a vacation etc. The next thing you would want to know is how to create financial goals.

How to create financial goals:

  • List down the things you would want to do in life and spend your money on. Categorize it as a short-term or long-term goal.
  • Prioritize each goal and fix an amount for it along with a timeline
  • Start saving money based on the priorities
  • For goals like saving for retirement, which is a long-term goal, you can get the benefits from your employer with IRA and 401(k) accounts.

Know your weak areas and plan to reach your goals

Once you have your list of financial goals ready, the next step is to plan on how to reach the goals. Your financial plan should help you with saving money, getting out of debts and have a workable budget. It is very important to be steady and regular with the plan. You can see the results only when you follow it regularly.

The planning phase:

  • The planning phase begins with analysing your weak areas. Track down every expense you make to know where your money goes at the end of the month.
  • Once you have the expense report ready, make a budget
  • Now, look for ways to free up some cash and pay off the debts
  • Meanwhile, start contributing towards the essentials such as emergency fund, retirement account etc. irrespective of the state of the financial plan
  • Start investing money based on the risk you can afford to double up your savings

Create a budget and stick to it

The personal financial management plan would work only when you’ve workable budget and you stick to it no matter what. A budget would help you to spend and save money effectively. You can even use budgeting apps to track your expenses and cut down on unnecessary spending.

If in doubt, ask someone

When you’re all done with clearing debts and left with money to invest, then consult a financial advisor. You can even check with someone you know and trust, who deals with the same profession to guide you on investment options and financial management knacks as well. It’s good to ask someone and get guidance on the things that you don’t know or new to it.

Summing up:

No one is born perfect and same is the case with personal finance management. Every small mistake you do would surely teach you something. It is very important to channelize your focus on the way you handle every single dollar. Follow the 5 steps mentioned above and you will be able to see the difference in the way you handle your finances.

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7 Simple Ways to Save Money

What are the ways to save money? Everyone would want to know the answer for the same. Saving money might seem like an arduous task when you’re already tight on your budget. However, one thing that is more difficult than saving money is getting started with it. Sometimes, it becomes the most challenging hunt to discover simple ways to save money and how to utilize your savings towards reaching your financial goals. So, the next thing to do is develop a realistic savings plan to work on your financial goals. We share with you 7 simple yet effective ways to save money and develop your realistic savings plan. Save Money Let us understand how these 7 ways will help you to get started with saving money and have a financially secured future. 7 Simple ways to save money:

  • Track down your expenses along with your income
The first and foremost step to take towards saving money is to know where your hard-earned money goes every month. Record every expense you make without neglecting even your coffee bills, newspaper cost etc. Every small cost adds up to a big amount and hence you need to account for every penny you spend. Once you’ve recorded your expenses, it’s time to organize it. Categorize it such as groceries, gas, rent etc. and total each amount to know how much you spend on each category. You can even use your credit or debit card statements to get the details.
  • Create a budget plan and follow it
The next step which is an important step in the savings process is to create a monthly budget. By creating a budget, you will know where to spend and where to be wise. By identifying areas where you can minimize your expenses, you can maximize your savings. Always it is important to implement what you plan and sustain it throughout. Discipline is very important when you are making savings. There will always be a temptation to spend more when you are stressed or happy, it is always better to control your urge to spend more.
  • List down your financial goals with a timeline to reach them
Once you know to minimize your expenses, it is time to plan your savings. The goals can be a short or a long one. Based on your need and desire you can set the financial goals. Short term goals may include buying your home, car etc., long terms goals include retirement savings, kid’s education etc. When you plan your retirement savings consider IRA accounts and other options.
  • Set priorities for your financial goals accordingly
The whole financial planning or ways to save money is not about setting financial goals but prioritizing them as per the need of the hour. Priorities change with time, so prioritize and sustain your long-term goals. If you want your kid to study at Harvard, it is important that you save the money needed for his education. Prioritizing the goals can be very useful to plan your savings plan.
  • Plan on saving money based on your priorities
A study says at least 10-15 percent of the monthly expenditure should be towards savings. If your needs and aspiration are high that saving this amount is impossible, it is always important to identify the pain areas and start implementing strategies to curb those expenses.
  • Look for options to save money
For short-term goals, you can look for the following options:
  1. Fixed deposits
  2. Savings Accounts
  3. Short-term investment options.
Long-term goals, you can choose the following options:
  1. Stocks
  2. Invest and resale of properties
  3. IRAs
It is always important to choose the right tool which can help you both in saving money as well as help in maximizing your profits. When your goals are reached, save the additional interest amount which you have got for your investment in another plan so that the habit of savings continues.
  • Opt for automatic saving option and watch your savings grow
Every bank around the world has many options to save your money. You can directly transfer the money into deposits by the click of a button. It is always important to choose your options wisely and watch your savings grow. The pleasure you get when your savings grow is priceless.

Summing up:

Saving money will take both time and efforts. It depends on how focused you’re towards making it work for you. The first thing you need to do is to get started with saving money by following the 7 ways. Initially, you might not see a huge difference in your savings. So, don’t get disappointed. Instead, notice the change you made from being a ‘person with no savings’ to the ‘one with some money as savings.’]]>