Managing your finances is not something that many young people are taught during their formative years, leaving many to find out the hard way that managing money is essential to long term success. The good news is that financial discipline and sound money management isn’t something that requires years of education and practice. As a matter of fact, it is something that most people can learn by simply employing these five tips.
The first step to any financial plan is to have a budget. Your budget doesn’t have to be fancy nor does it require you to use expensive computer software. The main idea behind having a budget is that you understand how much money comes into your household and how much you are spending. A budget is simply a framework for keeping track of your income, what bills you owe and what you are spending your money on.
To get started, simply keep a running total of every dollar you spend for an entire month. Write every expenditure down, no matter how small. Make a note when you spend your money as to whether it is a cash expenditure or a credit expenditure.
Analysis Of Your Budget
The second step is to analyze your spending. Categorize each expenditure so that you can determine what you are spending on bills versus what you are spending on other items such as clothing, entertainment, and other luxuries.
Lastly, subtract how much you spent from the amount of money you have earned to see whether or not you are in the positive or the negative. If you have a negative number left over at the end of each month, you need to begin making cuts so that you are able to afford your lifestyle. If you still have money leftover at the end of the month, it’s time to start thinking about putting away money into a savings account. Experts agree that you should be setting aside at least 10% of what you are earning as savings. If you aren’t there, it’s time to take a hard look at what you are spending to see where you can cut corners and increase the amount of money you are saving.
Tips For Saving Money
If you are looking for ways to save money on your monthly budget, consider these tips.
Borrow/Rent What You Need
Instead of running out to buy the latest book, movie or video game, why not consider borrowing it from a friend or from the library? It’s free and you can still get the same enjoyment out of the experience.
Pay Down High Interest Debt
One of the goals you should have is to become debt-free. One of the best ways to do that is to prioritize your debt and begin paying down the most expensive debt first. This allows you to focus your resources of getting rid of the debt that is costing you the most, which will allow you to pay down all of your debt more quickly. Try making bi weekly payments rather than monthly payments on this kind of debt. You’ll wind up paying more without making a huge impact on your budget.
Live Within Your Means
While it might seem hard to stay within the confines of your income now, it will pay off in the long run. Stop debt spending to get things that you think will boost your status in the eyes of others. Taking this approach will help you meet your short and long term financial goals faster.
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