There is a reason why a lot of people end up having unhealthy financial status. They were not able to properly manage their financial resources. This is because an increase in buying power, brought about by an increase of personal income, also increases one’s expenses. It is very easy to spend when you are earning much. This is a common mistake often committed by fresh graduates.
Managing personal finances is important in achieving financial stability. The problem is that this is not taught in high school as well as in college. As a result so many people, particularly young professionals are finding it difficult to manage their earnings.
However, this should not be. Financial management need not be a very complicated thing. All you need is the right attitude and you are well on your way to successfully manage your finances. Let us take a look at some techniques that you can use to achieve this.
Develop a budgeting attitude
Most of the time, people lose control of their finances because they failed to keep track of their purchases. Monitoring your expenses is never easy especially if your mindset is geared on spending. The first and the most significant thing you can do to keep track of your expenses is to make a budget and stick to it. Budgeting is important in securing financial security.
Once you have setup a workable budget of your income and expenses, it would be easier now to monitor your expenditures. Are you spending within the limits of your budget? Are you able to prioritize fixed and essential expenses like rent and utilities? If the answer to both questions is a glaring NO, then you are not managing your finances very well.
Proper budget of your income and sticking to that budget can get you a long way in securing your finances. Developing a budgeting mindset is a must for anyone especially young professionals who are just starting to earn their own income.
Develop a saving attitude
It is not enough to learn to budget your income. You also need to save. To be able to save money is your ultimate goal in financial management. Savings is your ticket to financial stability and it opens an opportunity to build wealth. The best way to start building is to open a savings bank account. This would provide you a safe place to put your money where it could potentially grow with interest.
Another useful tip in savings is to decide a fix amount of money to save every payday. Once you have determined an amount to save, immediately separate that amount from your gross income and deposit it in your savings account. The remaining money will be the one you would budget for spending. Save first and then spend what is left. This would ensure that you are able to save regularly.
Most people fail to have a savings because of their misconception that they will save what is left of their income after removing all the expenses. Doing that would, most of the time, leave you nothing to save.
Develop a pay-with-cash attitude
Limiting your expenses and saving money can get you a long way. However, you also need to learn to limit your debts. This is where a lot of people fall short. Debts can easily ruin your finances without you knowing it. That is because when you purchase through credit, you are won’t be able to monitor well the flow of your money. This is particularly true with credit cards.
Credit cards are subtle beasts. They can easily lure you into a false comfort of buying things without the need to carry cash. The problem with this is that it can easily lead you to go beyond your budget and spend more than you are earning. This is among the most common credit card dangers that people fall prey to. What you can do to steer clear off this problem is to make sure that you pay for your expenses, as much as possible, with cash.
Financial management is not rocket science. You do not need to be very good in mathematics to do this successfully. You do not need to have a master’s degree in management to achieve financial stability. It’s all about your attitude.
Featured and 1st image by epSos.de [CC-BY-2.0 (creativecommons.org/licenses/by/2.0/), via Wikimedia Commons
2nd image by Petr Kratochvi [Public Domain], via Wikimedia Commons