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“Nothing good comes easy”So does managing your personal finance. Your financial freedom, peace, or success doesn’t depend on how much you earn but how well you manage your money. Then it gets you thinking how is that possible because the best lives you see out there earn well. Well, I have seen a person with a very good income often getting broke or in a lot of debts. These four principles of managing your finances are going to show you how to manage your income no matter how little it is and be happy with it.
“wealthy people” hire financial managers and consultants and you wonder why because you don’t see the need for it. The thing is they understand that they might have a lot of money but the moment they start spending it wrong they could be broke in a minute.
Let’s not go too far as you don’t have millions in your account neither do I. And you can’t hire a finance manager either. However, you can handle finances like a boss all by yourself.
Why is managing your finances important?
If I may ask do you see the need to manage your finances? Or your income is just too good you don’t see a need to plan how you spend it?
The good news is this, you have stumbled upon this content and it will show you ways to manage your money and see the importance of managing your finances.
Here is how you manage your finances…
Principle #1: PLAN
Yes, PLAN. Plan your life, plan your expenditure, plan in line with your income, and just keep planning.
In case you don’t understand what Planning means in this context, it simply means budgeting.
Make a BUDGET. No matter how little or much your income is make a budget. Even if your monthly expenditure is the same, make a budget.
One big mistake we often make is to start spending our money without a proper budget.
These are the reasons why we need to plan or make a budget.
1. When you sit down to write a budget, you see what you can afford and what can wait a little bit more.
2. We often forget some very important things that need to be sorted out as soon as the paycheck arrives. Including it in a written down plan makes it hard to forget.
3. With a budget, you spend on track. Imagine going to a grocery store without a list. You are most likely going to buy what you don’t need and forget the important items or go overboard with your spending.
4. Unexpected expenditure comes up, it’s life and we are never completely in control of it. When such comes up a budget can help you solve it without extra cost. We will talk more about this soon.
However for a budget to help you manage your finances you have to take it seriously. This will be discussed in another principle, therefore, keep reading.
Principle #2: Prioritizing helps you manage money wisely.
In Economics, there is something called a “scale of preference”. This simply means scaling your needs based on which is more important. Like the need that needs to be solved immediately.
Hence in managing your finances, you need to have a scale of preference. Have priorities when spending your money. Before you pay for a service or order for a good be sure it is very important. Because the truth is not every good thing is important.
Food, house, electricity, water, and health are the top of our list. Prioritizing comes into play when all of the very important things are out of the way. I am saying this because every adult which I’m assuming you are since you are reading this post. Should have the bills above settled first before looking into any other.
Allow me to say there is a first phrase to prioritizing and a second phase. The second phase is what you do with the rest of your money when all the very very important things are out of the way. It is the most important phase because this is the point where your spending decisions either make you broke or stable.
Principle #3: Discipline yourself and decide ways to manage money better
Without discipline managing your finances becomes the most difficult task you can ever do.
I mean you know that a budget is very important and priorities matter a lot. But you have to be disciplined to practice all of them. You have to register it all in your conscious and subconscious mind.
Make it a habit to sit down and write a budget. See that all of your expenditures are prioritize because without discipline the principles we have discussed and the one we will talk about in a bit won’t be possible.
A budget is not easy to make, why? because there’s a lot that needs to be on the list but you can’t afford them all at once then priority comes into the drama.
This is exactly where making a good DECISION becomes a skill you never trained for but have to be an expert at it.
What you decide to put on your budget or make as your second phase priority as we mentioned earlier goes a long way in helping you become financially stable.
Principle #4: Saving the one “S” in managing your finances
Before I go on blabbing about how important saving is, how about I tell you how to go about it. Hence, read how to save your income that works.
Saving is not easy, so I am not going to tell you a lie about how you can do it overnight. However, I am yet to see a single soul who regretted saving.
Putting away some cash, that won’t be spent any time soon will be the best decision ever made by you. Because saving can save you from going into depths. Yes, it can because it has for me. You can read about how it saved me.
Let’s have a recap on how to go about managing your finances
If you want to live a good life, and be financially stable in a few words here is all you have to do:
Plan before spending. Sit down and write a budget.
Prioritize what you need. Remember not all good things are very important.
Discipline yourself, every good habit comes with discipline.
Decisions are not easy to make, try your best to be good at it. How about you just ask for advice from a friend. When you are a bit stuck on plans to make. The friend has to be good with his/her finances.
Never forget the one “S” when it comes to managing your finances. It could be your gateway to making an investment or starting a business.