A good number of us, if not all, never sat in a classroom where some gray haired overqualified lecturer or the harsh business studies teacher taught about personal financial management. We skipped classes while some never even attended or afforded formal education. But this doesn’t add up to validate why personal financial planning is still a mystery to us. The subject was and still is non-existent in the curriculum.
Unfortunately, life has presented to us the subject, practically. What do we do about it?
A recent study of the United States of America indicates 58% of its population does not have a personal retirement plan. This is just a tip of the iceberg. Add up a couple other shocking statistics out there and the truth will leave you utterly shocked.
We all need some schooling. The facts and tips below will highly assist you to get a good grasp of the subject and also prepare you to take on the challenge.
• Set up a budget
One sure way stay on top of your finances is to have a clear written down record of how much money you have coming in and the payments that you make. Periodically, this can take place monthly. You can use automated budget planners or just take note of all your transactions and figure out how much you have left over after exhausting all your necessary and other expenses.
After the first month, list down all your actual expenses sensibly and then pen down your actual budget. This should be based on your past spending history – decide how much each category will be allocated. Distinguish between projected and actual budget since fluctuations also occur.
Stay as honest as possible when setting up the budget based on how much you have while you keep track of it. Changes might happen but fortunately with your budget, it will be easy to get a clear picture of what brought the changes.
• Monitor your spending
In any case you have two options with regard to spending, critically examine all the prevailing factors and make a choice that will create a good impression on your money. Where borrowing or renting is cheaper and more affordable than buying, choose the former. Items like books, DVDs, and others can be rented as they save you space and hassle of upkeep. However, take into consideration the fact that it may be best to buy an item if you have to keep for long enough, after conducting a thorough cost analysis.
When it comes to credit cards, ladies and gentlemen treat that piece of plastic like cash. It’s not an unlimited spending device. Steer clear of running up balances you can’t pay up lest you risk spending huge sums of money on interest payments and fees.
Additionally, never spent what you don’t have. Lest it’s an emergency, only spent what you have, and not some cash you are expecting to make.
• Make smart investments
In our childhood years, we had these Disney type visions of making huge investments and raking in billions of dollars when we grow up. But soon as you graduate into adulthood you realize the financial world is much more complicated than you thought. However, taking time to study financial instruments and possibilities will equip and prepare us to be wise and tactful when it comes to investing our money even if the best one knows is when to back away.
Such offers as retirement plans offered by employers should be well used to one’s utmost satisfaction. If possible, scale up the portion of your pay check that goes into the savings scheme if your company has robust benefit plans.
Concerning stock markets, stay away from betting on small gains and losses in individual stocks every day. It’s not bad per se but it’s not an effective way to make money due to the risks involved and it’s also more like gambling, to some extent. Good investments are long term. However, make a point to check the company’s fundamentals when making choices about stocks. Take a keen look at mutual funds when buying stocks (mutual funds are bundles of stock collected together to minimize risks).
The unexpected sometimes happen and it’s advisable to take a good insurance coverage. It’s not known when a need may arise but having a good insurance can really cover up when a crisis hits. This may range from life insurance, Health insurance, Homeowners insurance, Disaster insurance amongst others.
• Set your savings goal
In the modern world, savings qualify as a necessity. If not a priority in your life, then there’s no second way about it. However small your budget is, spare a dime and let it form part of the savings. Think of how much you can manage to save per year, fast forward it to 15 years and just marvel at how much you can do with the money.
Start saving early, even while you are still in school, and then invest wisely. Additionally, create an emergency fund for unexpected or any other emergency situations that might take place, like your car breaking down, to avoid debts and other inconveniences.
Pay up debts once you are established. Start with ones with the highest interest rates as you move down in decreasing order until you have all of them paid up.
Take a financial health check
This basically entails taking stock of your overall financial status and devising mechanisms geared towards making the most of it.
Final thoughts
Solid financial planning relates to countless advantages – from living within your means to meeting your savings goals, to beating deadlines and paying up balances, to developing excellent spending habits and many other countless advantages. Ensure this makes part of your priorities and as always, stay focused on meeting the objectives.
To your good financial health
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