You must take control of your personal finances to have any hopes of financial security and prosperity. This is important regardless of how much you earn. Some people have no plan whatsoever with their money with the excuse that they are waiting to earn better before they take up financial discipline. This leads to costly financial mistakes that sometimes last for a lifetime.
However little or much you think you earn, you need to manage it well and be able to account for every penny you earn and spend. Here’s how to take charge of your personal finances.
Create a budget
You are doing yourself a great disservice if you don’t have a budget. Without a budget, it is difficult to track how you spend your money. If you don’t have one, create a budget that covers your three main expenses: living expenses, savings and wants or luxuries.
Your living expenses includes rent, food, utility bills and transportation to work and they shouldn’t cumulatively take more than half of your income. Not more than 30% of your income should go towards financing your lifestyle. This includes shopping and meeting your social expectations while the rest should go towards savings and debt repayment.
Save with a purpose
You should save a percentage of your income every month if you are salaried or portion of your profits if you are self-employed. This is not only for insurance in case of a rainy day but so as to have the capital to make the right investment moves you need to build and grow your wealth.
It is easy to fall off your savings agenda if you have not financial goals to motivate you and on track. You should save towards achieving a certain goal, not just for the sake of it.
Cut your spending
There are several ways you can cut your savings to add more money to your savings account to help you meet your financial goals faster. These doesn’t impact the quality of your lifestyle. You only have to spend your money more wisely.
Make a list of all your expenses and find those you can entirely bin and those you make a reduction on. For instance, you will save money by reading online content from sites like Smashingtops.Com for free rather than keeping your newspaper and magazine subscriptions.
Deal with debt
You will never attain the financial freedom you desire as long as you are saddled with debt. Debt repayment ties up your cash flow limiting your control over your personal finances. Make a plan to clear your debts as soon as possible so you can have the cash to make the money moves you want.
The first step to clearing your debt is avoiding further debt by living within your means. Also, find ways to cut your living expenses and channeling the extra cash towards debt repayment.
The benefit of dealing with your debt is that it builds your credit score so you can borrow money cheaply in future, should you need to access credit to fund your investment plans.