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Money management is a skill we all should be craving to have and be ready to go to any extent to acquire. Without it, we can never gain stability in our finances. The first step to growing your wealth is managing your money and that is what personal finance is all about. Personal finance is all about what you do with your income on a personal level. This involves every single thing you do with money be it cash transactions or cashless transactions. Controlling your spending the best way you can in order to be accountable. Without all of this, you will never understand your finances and gain financial stability. With this overall look at what personal finance is all about. let’s in-depth see what really is personal fiance is and the tips that can guide us.
What really is personal finance?
Personal finance covers everything money management. These include budgeting, daily or weekly expenses, saving money, financial goals and investment.
Being accountable for your finances requires you to make a budget every new month, watch your spending on a daily basis, save money for emergencies, set financial goals like paying a specific amount off your debt or having a good credit score, starting a side job for extra income and investing in a business by starting one yourself or making your money work for you through shares.
These things are just the basics on the surface, however, they are easy to learn, such as creating a budget if you are new to budgeting and implementing. As long as you are serious about becoming financially stable you will become better at handling your finances.
How can personal finance help you?
The number one secret to growing wealth is managing the little you have well. Hence, if you plan on becoming wealthy or for a starter become financially stable. What you need first is to learn how to manage your money. And that is how personal finance helps you out.
Managing your money well allows you to pay off debt faster, save money and have extra money to start small businesses or make investments here and there. As long as you have no ideas what you do with your money which is what personal finance is all about in the first place. You can’t grow wealth and that’s a fact because the secret of wealth-building lies in what personal finance is all about.
8 very practical personal finance tips
Personal finance tips are easy to practice, it’s not an overnight process but it gets better along the way. With discipline, you become your financial expert within a short period of time.
1. Track your spending
The easiest money management tip for beginners working on their finances is tracking every cent you spend. This is easy as spending money is what we do daily. The only thing missing is we never keep account of how much we spend
How to track your spending
Here is a simple way to track your spending if you’ve never done it. You are a step closer to managing your finances the right way.
- Have a pen and paper with you before you step out for your activities for the day. It doesn’t matter what activity you are starting with (like going to the gym, dropping kids at school or going to work). Have that pen and paper in your purse.
- Don’t try to be careful with how much you spend. Just spend as you usually would.
- Write down everything you spend money on even if it cost you just a dollar or less. Write down that cup of coffee, the gas you bought, the tip you gave and that ice cream to cool you off. I can’t think of all the many thing we spend little money on everyday but make sure you write them down with the amount it cost you.
- Don’t be too quick to add up your expenditure list yet. Make it the last thing you do before you go to sleep. Just to make sure you won’t be spending any more money for the day.
Doing this will give you exactly what you spend every day and you would be shocked with the total. It doesn’t stop there. Do this exercise for the entire week. What you spend on Monday won’t be the same as Tuesday and the day after. After a week then you can know your average daily expenditure.
2. Make a budget every month
Making a budget might sound like work but it is not. And it is the best personal finance tip you would get and practice. Plus the best thing that ever happened to your finances. If you are planning on taking budgeting seriously then here are some budgeting tips to guide you. But first…
What is a budget?
A budget is a list of estimated income and expenditure for a period of time. The period of time could be daily, weekly, monthly or quarterly.
This means a budget comprises your income and what you hope to spend out of it. Hence, it includes every income you hope to earn and every expenditure you plan to make no matter how little.
There are different types of budgets that you will be learning next and the one a beginner can start with.
Types of Personal Budget
Here are some types of personal budgets to help you understand budgeting and take your personal finance to the next level
1. Spending first budget: With this budget type you just go ahead and spend before you save what’s left. That sounds risky to me but a lot of people practice this.
2. Saving the first budget: This is my type of budget because I make sure I save first before spending. I save like 10% of my income first then when I’m done spending and still have some change left. I save it.
3. 50/30/20 budget: An easy to understand and practice budget type. Your income in a percentage goes to different things. 50% for needs, 30% for wants and 20% for savings. Whether we follow this budget or not. Our basic needs such as housing, food, energy and health. Takes the majority of our income.
4. Zero-based budget: You simply allocate your income to everything you plan on doing until you are down to zero. This means when you budget you include savings and emergency funds plus miscellaneous expenditures.
5. Spending ceiling: Having a spending ceiling should not only be a type of budgeting but a money habit to adopt. It is a money discipline that can help you watch what you do with your money every day, week and month.
How to create a budget in some simple steps
Preparing a budget might sound overwhelming at the beginning because you are just starting out. But as you get used to it it becomes easy. Plus there are beginners budget templates and budget spreadsheets to help you out. Before all of that…
Here are some simple steps on how to make a budget:
- make a list of all your monthly expenses
- rent
- grocery
- utility
- personal care
- car payment
- eating out
- health care
- emergency
- saving
- e.t.c
- Calculate you income which is every money you are going to earn for the month. If you have more than one job or many income stream write them down and calculate how much in total you will make in a month.
- Sum up your income and expenses for the month. You will either have a balanced budget or unbalanced budget.
Always priorities your expenses, just as seen in the 50/30/20 budget type. Our basic needs always consume most of our income. Hence, it’s only appropriate for you to solve them first.
3. Save money like you mean it
Personal finance tips without saving money are never complete. The ability to save money is the bedrock of gaining financial stability and you must take it seriously. Saving money gives birth to a lot of things one of which is wealth. And growing wealth is the basis for personal finance.
Save for emergency funds
Having an emergency fund is what we know as saving for rainy days. What this helps you out with is debt. When you have a saving plan it means you are never without money even though the money is not for daily spending. However, you have a backup plan and when an emergency comes up instead of taking debt to solve it. You have your savings to the rescue. It is that simple.
Save for bigger purchases
The easiest way to buy expensive things is to save for them. Removing a large sum of money to make a purchase at once can affect your finances for a month. To avoid that save for that purchase.
This reason for saving doesn’t apply to the things we tag as “important” only. It could be for a wardrobe change, or that expensive shoe you dream to have. I mean it could be for anything. The aim here is to help you manage your money the best way possible.
This can help you stay away from accumulating more credit card debt.
4. Live below your means
Just because you can afford a $100 purse doesn’t mean you shouldn’t buy the one that cost $50 if it will serve the purpose. And that’s what living below your means is all about.
Yes, you have a good credit card score, it doesn’t mean you have to keep shopping on credit or apply for a new one. Or buy a car worth $15,000 just because you can afford it. When a $10,00 car will serve the same purpose.
Living below your means simply is about cutting down your expenses in areas you can. So you can put that extra cash to use.
5. Shop like a pro shopper
To me, shopping like a pro means to never shop without a list and that’s period. Writing a list for shopping is not only to remind you of what to get but also to guide you.
Another way to shop like a pro is weighing your options between brands when shopping. Some brands are just more expensive because of their name and to be honest, their quality is the best most times.
However, you are trying to live below your means or save some extra cash. So why don’t you just pick that box of cereal that is not that popular and cost less and will serve the same purpose as any other? Which is giving you breakfast. I hope this makes sense to you.
Shopping like a pro involves you know what items to buy in bulk and the things that when you buy in bulk will only lead to money wastage. These are just basic finance tips, which can guide you with frugal living, budgeting and living below your means.
6. Pay off debt
When you live below your means and make saving money seriously you will see that having more debt is no longer an issue. You might just have to focus on the old lingering ones. Which to be honest paying them off will become easy once you become intentional about managing your money.
The question still remains, how do you settle your debt in a way that keeps you balanced? And the answer will be, slow and steady with consistency and discipline.
Your debt won’t just disappear, you have to do something about it and it won’t take a day alone. However, it can come to an end and you can be debt-free. Go ahead and read in detail how to get out of debt fast. For a step by step guide.
7. Have a financial goal
Setting financial goals helps you stay on track and it doesn’t have to be big. Just little goals that can help you achieve some things financially and get you closer to becoming financially stable.
It could be weekly goals or monthly goals which at the end of the year summed up together would have helped you solve a big financial problem. Like having a monthly saving plan that will help you make a big purchase so you can avoid using a credit card.
Or a plan to pay above your minimum debt charges/deduction to be able to pay off 50% of your debt within a year.
I have no ideas what your financial situation is. However, set goals to make it better. Don’t overwhelm yourself, rather set simple goals you can achieve.
8. Invest
When you make investments you make your money work for you. And a great personal finance tip must include it.
Personal finance is all about doing the little things that will amount to big results. The same goes for making investments. It’s not about carrying a huge sum of money and put in one place. But taking some well-calculated risk and putting your money in different places. And watch your little interest grow left right centre into something big.
Some money management tips for beginners
If everything written above sounds a bit too much for you and you is still wondering where to start. Here are the personal finance tips you should focus on for a start.
- Track your spending
- Save money
- Learn to live below your means
You can start with the three above then find your way to practising the rest.
A few personal finance tips for young adults
I see this more as a bit of financial advice to young adults. And if you are a young adult reading this then you are serious about your personal finance. This means with consistency and discipline you will be wealthy pretty soon. So here are a few finance tips for you…
- Take saving money seriously. Be consistent and dedicated to saving money. On weeks or months you don’t feel like saving let your money discipline guide you.
- Watch your spending because it is a very practical thing to do. You might want to be all over the place shopping and having fun and it’s okay. Just make sure you are not irresponsible with money.
- Making investments is a wise thing to do but don’t rush into it just because it sounds interesting.
- Work all the extra jobs now that you got the energy. And give yourself an early retirement while still young.
- You are not too young to start living frugal.
In Conclusion, what are your personal finance tips?
There are so many personal finance tips and what you’ve learned today are but a few. These finance tips are very practical and will help you achieve your financial goals in no time.
However, at this point, we would like to know what personal finance practices have helped you stay financially stable. Please share with us in the comment section below.
