If 2020 taught us anything, it’s that disasters can hit any second. Between an already stagnating economy, a global ongoing pandemic, and countless layoffs across all industries, personal finance management has become one of the most important attributes to succeed in this new decade.
No matter their level of income, everybody must manage their money efficiently to be able to live comfortably and avoid falling in the red. Whether you’re a freelancer or a self-starting entrepreneur, this guide provides plenty of useful tips that will help you stay on top of your finances.
1. Monitor Your Income and Expenses
Unless you studied business or accounting in college, money management is never obvious. The first step to mastering it is knowing exactly how much is coming in, and how much is going out of your accounts on a monthly basis. Looking back, determine your typical spending patterns and identify the types of expenses you have each month. Whenever you get your paycheck or receive dividends, make it a point to keep track of your earnings. By compiling this information, say, in a spreadsheet format, you’ll know exactly how to allocate your money, which brings us to our next point.
2. Don’t Live Above Your Means
You cannot expect to win the financial game if you spend money on things you can’t afford in the first place. Living within your means is an absolute necessity, especially if you’re just starting out your professional career. While it’s easy to be tempted by a new pair of sneakers or eating out several times per week, these expenses can quickly add up and drown you out. Likewise, contracting debt for purchases that aren’t urgent, like home improvements or the latest car model, should also be avoided. Think of your current sacrifices as a guarantee for a stable situation and a more prosperous future.
3. Use a Money Management App
Budgeting is what money management is all about. Now that you know how much you have at your disposal, categorize your expenses, and create envelopes accordingly. Among their wealth of resources, the financial gurus at DyerNews.com explain that using a dedicated money management app is a surefire way to avoid running out of money before your next paycheck. As such, aim to establish individual budgets for rent, utility bills, groceries, transportation, debt installments, and whatever is pertinent to your lifestyle. There are both free and paid apps that will provide a comprehensive overview of your situation and help you manage your expenses down to every cent.
4. Make Saving a Priority
In times of crisis and uncertainty, people need a safety net to fall back on. If you didn’t already start saving, better start today; it all begins with a single dollar! Putting aside a portion of your income every month, even if you’re just sparing $30 or $40, can help prepare you for dire circumstances (job loss, unexpected medical bills, etc.). Many financial experts recommend saving at least one-quarter of your income to be able to build an emergency rainy day fund quickly. It might entail some sacrifices depending on your current earnings, but you’ll be glad to have a stash of money to cushion your fall whenever you need it.
5. Start Investing
Rather than have your savings sit in the bank and earn you negligible interest, think about investing it smartly. Today, despite a fragile global economy, there are countless opportunities to place your money and turn a good profit. Whether you’re looking at the stock market, financial instruments, currency exchange, or micro-investments, conduct some research to familiarize yourself with the most lucrative options out there. Remember that placing money always comes with risks, so document yourself well and proceed with caution.
6. Ask for Help
Money talk is widely considered taboo. Nevertheless, when times are tough and you’re struggling to stay afloat, don’t be afraid to reach out and seek the help you need. Be open about your financial situation to your banker, relatives, close friends, or get assistance from a support group.
Sharing your hardships will inevitably teach you ways to regain control of your situation and, hopefully, find permanent solutions to your ordeals. As a last piece of advice, if you ever need to borrow money from someone, make repaying them your number one priority.
Money management is no easy feat; it takes a lot of discipline and perseverance to sort out our finances and strike a healthy, sustainable balance. By making your own balance sheet, setting realistic budgets, saving, and investing, you’re bound to find it easier to manage your money and start building wealth today.