If you think that you are new to the personal financial management spectrum, think again. Many people often are working with personal finances, but do not realize that they are because they are managing finances incorrectly. Without keeping track of finances through means of a budget and software, you can run the risk of overspending and going into debt. Many financial advisors recommend several personal financial management tips in order to help with managing your finances, but there are three which are the most important of all to remember: understanding personal financial management, managing your finances for the future, and investing in personal financial management software.
Secret #1: Understand Personal Financial Management
Personal financial management can be a tricky subject if you are not familiar with the terms. In order to be successful with managing your finances, you need to understand what exactly you are doing. Through financial planning
, you need to prepare for the future by learning how to budget correctly and prevent financial disasters.
By budgeting correctly, you will be able to manage the flow of money in your household, repay debts, and prevent overspending. With a budget, you want to first create a spreadsheet on either the computer or on paper. Be sure to include your monthly income, all bills, and any other financial obligations, using red ink to denote an expense. Use a calculator to see how much you are spending compared to how much you are earning each month. By seeing how much you have extra, you are able to set aside money for your savings account and know how much not to charge on your credit card each month.
Secret #2: Manage Finances for the Future
In the event that you used to overspend your money and have racked up a high credit card bill, take advantage of a budget to manage your finances and pay off the bills. Some free personal financial management advice: pay off your debts as soon as possible! With credit card debt, the interest adds up fast and you can find yourself being forced to pay a high amount of interest if you cannot make your payments on time. Include a spot in your budget for credit card debt and set aside money each month as a fixed expense until you can pay off that debt.
You can also use your budget to prepare for future events. For example, if your child wants to go on a field trip that is expensive, use the divide and conquer technique to save the money. Let’s say that the trip is planned for March, you find out about it in September, and it costs $750. Divide the total cost ($750) by the months until the trip (6 months) to reach how much you need to set aside monthly ($125).
In extreme circumstances, you may find yourself in need of emergency funds. Though many people use them incorrectly, a cash advance
can really help you find the money you need. If you do take out a small, short term loan, be sure to include repayment of it into your budget! The interest can add up tremendously.
Secret #3: Invest in Personal Financial Management Software
If you are short on time, one way to help you manage your finances is to invest in personal financial management software. This software can help you create a budget and track your finances through any investments you may have. Many personal financial management software come with templates of different budgets, providing you an option to select one that closest fits your spending habits and be customized to fit you exactly.
They also provide ways to track your investments. Although not all personal financial management software has the same features, many provide charts and graphs to see any growth in investment, and also the amount of spending that you do each month. If you are prone to be a frequent shopper, you can keep track of how much you pay on entertainment, clothing, and food each month. At the end of the month, you can compile a graph showing how much you are spending in each of the miscellaneous expenses so you can see where you need to cut back. You can also pay bills online via the software, which can be helpful in not only cutting down time that you need to spend writing a check and going to the mailbox, but it will automatically update your budget and expense charts with the amount of the bill.
Being able to manage your finances successfully is a very important skill to possess, especially as you find yourself being faced with more financial responsibilities that come with marriage and having children. By being able to manage your finances while you are still young, you will be able to take what you have and build upon it for a successful financial future. If you are already married with children but are falling behind on your finances, remember that with the proper commitment, it is never too late to become a pro at personal financial management.