Do you know where you're spending? The key to better management of your personal finances is understanding where you're spending your money.
In addition, it's essential to know what you want from life and what financial goals you have in mind.
In this collaborative/contributed post, here are five tips for better management of your personal finances:
Track Your Income and Expenses
Track your income and expenses for three months. At the end of that time, you will be able to see how much money is coming in from what sources (pay, investments) and where it's going out-to both fixed costs like rent, bills, and groceries and variable spending on things like entertainment or clothes.
You can't afford to do everything, so figure out what is most important to you. For example, it might be saving for retirement first and then making sure that there's enough money left over to pay the bills. Or maybe it's providing a comfortable lifestyle for your family despite not being able to save much money while doing so. Always spend towards your core values. That way you'll never regret those spending decisions later. You may also want to track your emotions to see if any patterns emerge.
"A budget is telling your money where to go instead of wondering where it went." - Dave Ramsey
Create a Financial Wellness Plan
While I don't personally believe in "budgets" because they're like diets -- you can stick to it for a little while and then you either rebel and start shopping like mad or you just get sick of it and stop doing it. However, what Dave Ramsey says is right -- it will help you see where and when you're spending money, as well as make sure that there's enough left over for the things that matter most to you. It's also important to be able to decide where you want your money to go, rather than at the end of the month, wonder where it all went. So, order your finances from high-priority items first down to low priority ones (based on your Core Values). Next, create a financial wellness plan that will cover all your necessary expenses and see how much you have leftover. Finally, look for ways in which you can save more money each month by cutting back on what doesn't align with your values. For example, if one of your core values is health - you can cut down on drinking, quit smoking, or reduce the number of times you eat out per week.
Build a Savings Account For Emergencies
It's essential to have a savings account for emergencies. To me, it's one of the best ways to create true financial freedom. You should put money in this account every month, even if it's just a little bit. For courses that can help develop your financial management skills click here. In addition, you should save enough to cover at least 3 month's worth of living expenses, if you have a consistent paycheck and at least 6 months' worth of necessary expenses, if you don't have a consistent income.
Earn More Money
It's possible to make more money by finding an even higher-paying job, asking for a raise or taking on a side hustle. It might take some time and effort, but the reward is worth it, especially if you're struggling with debt payments or other expenses that are squeezing your budget.
Eliminate Unnecessary Expenses
Getting rid of unnecessary expenses and subscriptions is a great way to save some money. This is the reason tracking your expenses is good. Many times people discover subscriptions they never knew they were making each month.
There are many things you can do to manage your personal finances better. Track your income and expenses, create a financial wellness plan and save enough money for emergencies or other unforeseen circumstances. Next, work towards earning more money by finding higher-paying jobs, taking on side hustles (if possible), and finally eliminating unnecessary expenses like cable TV or paid subscriptions that you're not using.