6 Tips for Effective Financial Management Concerned about your bills and trying to figure out how to address your financial problems? As adults, we are expected to know how to manage our money. However, not everyone was privileged enough to learn about the skills of managing your financials efficiently .
The lack of knowledge would eventually cause a dent in your financial stability. The good news is you don’t need an Ivy League degree to fix your financial troubles. However, here are pointers you can consider when trying to resolve your financial problems.
Surviving on Cash Going cashless is the trend these days. Ask yourself, do you remember the last time you paid for things using only cash? Unfortunately, many individuals start to develop terrible spending habits due to using credit cards. This is because using debit and credit cards blurs the line on what they can afford. However, it is extremely easy to know whether you can afford to purchase something or not at that exact moment with cash.
Your first task is storing all your cards for at least two weeks. After that, you can only purchase something with cash when you need to buy it. If you have completed the challenge in two weeks, award yourself a passing grade. By reducing the usage of credit cards, you will be more likely to lessen the chance of overspending beyond what you can afford.
Also Read:- 8 Reasons Why Today’s CFOs Must Embrace Strategic Financial Management
Be Aware of Your Spending Think about what you discovered about your spending patterns when you were solely using cash. Was it easier or more difficult to part with cash than with a plastic card? Did you buy what you required, or did you also have enough money to buy whatever you wanted? How much money did you have in the end? It will help if you ask yourself these questions to increase your financial awareness.
According to some research, when customers use credit cards instead of cash, they end up spending up to 15% more every time. Spending extra on each purchase eventually adds up over time, which will result in debts that will last for life. Hence, be mindful of how you spend your money.
Track Your Money What happens to our money? Where does it all go? Somehow, for some of us, the money in our bank account never seems to last long enough after payday. Hence, effective money management is crucial in ensuring that our monthly income sustains our lifestyle.
Financial literacy is knowing where your money goes and how you spend it. While constantly keeping track of your financials might be tedious, this activity is proved to be highly enlightening even for the most seasoned finance professional.
Your task is to keep track of your expenditures for at least two weeks. First, take note of where you are spending your money in a little notepad or by utilizing an app on your Samsung phone . You should at least jot down two weeks’ worth of expenditure data to pass this challenge.
Create a Budget Making a monthly budget plan is one of the wisest things anyone can do for their finances. Yet, this task is often overlooked by a lot of individuals. Having a monthly budget plan makes life so much easier since you have given yourself a guideline on deciding how to spend your money for a certain period.
Ironically, many schools do not educate you on how to create a spending budget. If you want to remove expenditure from your budget, begin by reducing it by 50%. This will be an indication of whether you can stick it out in the long run. If you can make budgeting a habit in your life, you will know that you have completed this task effectively!
To start, you do not necessarily have to have a book and pen to create a budget planner. Try to download the best free budgeting app MoneyPatrol available online, to start your budget planning and also help you keep track of your finances and spending habits. Put your Xiaomi phone to use and install the latest budget tracker to ease your daily financial planning.
Find a Replacement for One Big Expense It is easier to cut out a significant expense that you are so used to in your life if you replace it with something else. For example, if you want to stop buying overpriced coffee every morning before you work, think about how you can replace it with a new habit.
You can get yourself a new travel cup, purchase some coffee beans to your liking, and prepare your own coffee at home! Afterward, change your routine so you would not be tempted to stop for coffee in the first place, such as taking an alternative route to work.
Your task is to identify one expense that is eating up a significant portion of your budget and locate a suitable alternative. Cutting back on coffee is only one example that you can practice. Consider scaling back on entertainment expenses, quitting smoking, or reducing spending on unnecessary activities. When your bills are paid on time, and you have a little extra money in your bank account, you know you have completed this project successfully.
Create a Plan to Pay Off Your Debt Everyone has a little bit of debt, which is unavoidable nowadays. So, if it is prevalent, is it really a big deal? Yes, it can be. If you have accrued debt over time, you need sustainable debt solutions that accommodate your lifestyle and not fast fixes you cannot practice in the long run.
Moreover, interest rates will inevitably rise, and your income will likely decrease over time, for example, when you retire. If one of these things occurs, and you have relied on credit to make ends meet, you will have to make some difficult sacrifices in your life.
Tackling your debt sooner rather than later gives you more possibilities in terms of solutions. However, having said that, many people put off seeking debt relief because they are either ashamed or don’t know where to turn. A few tips you can practice in managing your debt are spending within your budget, buying a second-quality car, and paying more than the minimum payments. You can even get a second job to pay off your debt quickly.
In conclusion, if you ever need financial help, do not be ashamed to ask around. Financial literacy is crucial knowledge that everyone requires to survive in this world. Therefore, always seek our professional assistance to educate yourself and improve your level of financial literacy.
