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Significant Tips to Manage Your Personal Finance

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October 9, 2017

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Significant Tips to Manage Your Personal Finance

Significant Tips to Manage Your Personal Finance

Personal finance is something you will never learn in school. And it is a subject matter that you rarely talk about in the dinner table with your parents. By the time you realize your wayward spending, you begin to feel that it is already too late.

 

But it is never too late. The mere fact that you stumbled on this page is a great indicator that you want to change. Below are three steps on how you can manage your personal finance better.

 

Create a Budget

To manage your personal finance, it is imperative that you understand how much money comes in and how much money comes out.  A budget is the only way you can accomplish this.

List down your bills to get a total of how much you are paying every month. This includes your mortgage and bills for water, electricity, heating, and credit card bills, if you have any. Once you have this totaled, you can compare it with the salary you are earning every month. The remaining balance is what you have as spare.

 

Your budget must include a specific amount that you will spend on flexible costs like your transportation and food. If you have no idea how much you are spending on these, you need to start tracking them. Put them on a spreadsheet and categorize every purchase accordingly—clothing, rent, gasoline, etc. At the end of three months, you will get a clear picture where your money is going and decide where to cut.

 

Establish Financial Goals

People will never manage anything without a goal. Decisions of business managers are guided by their goals. If a restaurant has poor sales, the managers must come up with schemes and plans to improve sales, all of which are tied up to a specific goal that has a tangible monetary value.

Personal finance works the same way. You cannot just say that you want to buy a house or a car one day. You need a specific amount, say like, £100,000. Then you can break this down into 10 years, or five years. By dividing the amount into specific months, you will know how much money you need to set aside every payday.

 

Execute Your Plan

Execution is everything. It is often said that ideas are dime-a-dozen. Your ideas and your best laid plans will never come to fruition unless you execute. While you are at it, you need to get rid of negative financial thoughts. Never think that you will fail because it is a self-fulfilling prophecy.

Once you have created a budget and set your financial goals, you need to stick to your commitments and do everything you can to achieve them. If you committed to allocate 20% of your income to savings, then do so. You must pay your savings account first before spending on anything, even if this means saying goodbye to your daily cup of latte.

 

Pay off your debts and never buy on credit. Avoid anything that charges interest. If you must use a credit card, only do so if you already have the money set aside for that purchase. Use credit cards only to get freebies and discounts but never to purchase something with money you do not have to begin with.

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