When it comes to managing your personal finances, you always want to make sure that your lifestyle is sustainable and that you balance your existing needs with future needs. This involves a lot of periodic planning to know how much you bring in, how much you spend, how much money you save, and how much you are putting aside for future retirement. While many people have shown great discipline in being able to do this, others have struggled.
The most important thing is that you are in charge of your money. While debt can be a great leveraging tool and the human spirit wants to be able to enjoy life, these habits must be kept in balance, with the consideration that the more you spend today the less you will have later on in life if you expect to retire. It’s also important to understand your income, and potentially consider ways to improve it. So here are five easy ways you can be in charge of your money.
1) Only take on reasonable debt
Debt is sometimes considered, in American culture anyway, a principal life. It is necessary to get things you want and need now but don't necessarily have the capital to do so. After all, not many people inherit money nor find ways to build up capital fast enough to wait out on these purchases. In addition, society has moved away from cash to credit, and the swipe of a card gives a sense of a blank check.
It is important to always keep debt at a manageable level, and only take on big amounts if it is going to leverage your future self, such as a mortgage, or home improvement loan that can help to increase the value of your home with desirable features such as a curved barn door track to create a dream house.
Personal Finance 101 always suggests that the best starting point for any financial making is to create a budget. Consider your existing lifestyle and how much it costs you to support it. Once you have a handle on that, make adjustments if you feel that you are living too frugally or if you are on track.
Make sure you've separated out what your needs and wants are for your lifestyle, and ensure you still have money left over to put away towards a future date. If you find that you are having difficulty sticking to a budget, use the envelope method by setting aside cash in envelopes for specific line item expenses.
3) Have an emergency fund
No matter how much in charge you are with your money, the reality is that bad things can happen. Home appliances can break down, you can lose a job, or maybe you had a month where some expenses just went a little over. Having an emergency fund is great because you can use that money instead of having to take on a loan. Therefore, when pain enters your life, it is only there for a short period of time, and you can continue to move on towards your long-term goals.
4) Secondary income
If you are in love with your lifestyle but feel like you can't depart from it because of budget, you can always consider secondary revenue streams. You can invest in things that require a little bit of time such as dividend income, rental properties, or purchasing bonds. Additionally, you can utilise freelancing, or try to sell things out of your home. Finally, if you have the time, you can consider a secondary job doing home maintenance tasks like mowing, or consider a side business for home improvement.
5) When in doubt, invest or pay off debt
If you have leftover money month to month from your budget, you might ask what should I do, spend it or invest it. The best answer nine times out of ten will be to invest it or pay off debts. The reality is that material things only provide instant utility in most cases while saving for your future can yield greater spending power in your golden years. You can decide to always put it in a savings account as well if you think you might need it before retirement so that you can easily liquidate it. If you're interested in investing then don't miss out on this Freetrade free share worth up to £200!