How to manage personal finances

In the 21st century, we are assaulted by temptations that affect our finances in a bad way. Every important life expense is more expensive than it used to be, from student loans and mortgages to property prices and life insurance. Then, there are the never-ending newsletters and in-store sales that force us to spend money on things we don’t necessarily need, but that give us the instant dose of dopamine.

While this is not something that schools prepare us for, we can teach money management to ourselves through experience and by practicing discipline in every aspect of our lives. Everyone has to deal with personal finance management sooner or, so to make it easier, there are some specific steps and tips that have to be followed in order to be successful at it.

Everybody knows that savings are key in long term financial fulfillment, but how exactly can one save money when day-to-day life is so expensive?

It all starts with keeping track of every expense and create a realistic pyramid of needs. Being consistent and sticking to a plan is essential if you want to put some money aside, but there may also be some emergencies where loans are the only option. The balance lies in knowing where to splurge and where to save, but, should an unpleasant expense appear, it’s equally important to know where you can find that extra influx of cash.

 

Set financial goals

Decisions made for short-term goals influence the big picture for long-term aspirations. Depending on the latter, you should think about what the steps you have to follow in order to get there. You may want to retire early, travel for a long period of time or put some money aside for your children’s tuition and college studies. Whatever your main purpose is, you have to pay great attention to your current expenses, see what exactly you can save, watch the bills and make sure you keep a good credit score.

The most important thing when you set a long-term goal is to break it down into smaller steps and write them down so they’re more realistic to achieve. For example, saving $5,000 for a honeymoon may sound difficult, but if you put aside $20 every day, you’ll have that amount within a year. Awareness plays an important part in all of this, so if you are a person that gets demotivated easily, it is especially important to write them down and acknowledge the small victories. Follow the priorities, and don’t spend money on things or services that you don’t absolutely need. Of course, it is ok that from time to time you buy yourself a little something, but do not make it a weekly habit.

Don’t underestimate the importance of small changes. In time, cooking more at home, upcycling furniture or buying from vintage shops can help you save a lot of money, even though you might not realize they’re important.

To create a sustainable long-term plan, you need three things: a main goal, SMART objectives and prioritizing. From time to time, this plan may need a refresh, but this is something natural, as people’s needs change and even the salary may be variable.

Set a budget

Making a budget means allocating a specific amount of money each month for the usual expenses, like bills, food and other subscriptions, in the form of a well-structured plan.

This will also help you achieve your goal with its specific objectives and the more details you add, the more efficient it will be.  The budget you make has to be realistic and must help you accurately divide your money to cover all your needs for the months or years to come. Not having a plan may affect your spending, because without a specific goal in mind, you will be far likelier to make impulse purchases that may seem right on the spot, but do not help you in the long run. Being “cheap” may attract a lot of whispers and rumors, but it is beneficial for your own sake. After all, adding three extra toppings on your large coffee gives you less satisfaction than putting that money aside and buying a new phone at the end of the month.

On the other hand, if you have some emergency expenses that require a lot of money within a very short deadline, you can get informed on personal loans and decide what works for you. Some of them may be flexible, but on a longer period of time, and some can be paid off right away if you manage to gather the money on time. Don’t forget that you have to pay attention to all of the information included in the contract, especially the fine print, and double check the reputation of the loan provider. If it sounds too good to be true, it probably isn’t, so make sure you look for financial help only at trusted, certified sources.

Ask for help

There are moments in life when we don’t seem to get a hold of things and we can’t save money no matter how hard we try. During these times it is important to know when and how to ask for help, but most importantly from whom. There are various key moments when you should ask a professional to help you when it comes to budgeting and finances. Maybe what you need is more discipline, but the solution can also lie in getting a new job or making lifestyle changes.

But if you did manage to save some money, you might be wondering what you should invest them in so that you can have a source of passive income and safety blanket in case an emergency arises. For that, you can ask a financial planner to show you what to do with your money in order to multiply them, but if that is out of your reach, you can find legitimate advice in e-books or read opinion pieces from the world’s famous investors.

Investing in real estate or some other field may be the long-term solution you are looking for, because this is the strategy that will help you gain more money and build your fortune. Another solution may consist of life insurance, if you want to make sure the future of your family members is taken care of.

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