It always seems like there is never enough money to do all the things you need to, want to or try to do. In school, we learn math, but the practical and very human task of managing your personal finances is apparently not a mandatory, or existent course. Instead of a course, here is your practical starter to becoming a manager of your personal finances. Below are tips on how to manage your money:
If budgeting is about priorities, then getting rid of debt is paramount. Without having to change your lifestyle and spending habits, you will need to make sure you have the allocated monthly amount to slowly get rid of your debt. If you have debts from multiple sources, it is best to tackle the higher interest rate debts first.
Before having a budget, spend a month keeping track of your income and spending. The point of this is to first see how you spend, be it within or way beyond your limits. Be honest with yourself. It is after all your money.What you will need to keep track of is household bills, living costs, financial products (insurance, investments), family and friends (gifts), travel (car costs, public transport) and leisure (holidays, sports, hobbies, restaurants). A good start to this is allocating percentages of your income to all of your expenses i.e. 50-60% on fixed costs, 10% on investments, 5-10% on savings and 20-35% of guilt-free spending. Essentially you want to be spending less money than you are making. It is better to spend less than more or exactly what you have. Spending less or just enough won’t protect you from unforeseen circumstances like family emergencies or damage to personal property.
This means thinking about retirement when you need enough money to live comfortably while you aren’t working and don’t know how long you will live for. But this is also a retainer for personal and family emergencies that can rake up costs at the body shop or hospital. Depending on your income this might vary, but look to have at least a couple months worth of income saved for unforeseen emergencies.
In line with looking ahead, it’s not just about having a lump sum saved for general and unknown rainy days. That is a good start, but you want to have clear goals. Giving yourself financial responsibility in the form of concrete savings goals. These saving goals can help you better prioritize your spending. Once you have your emergency income, setting goals will help create a better picture of all the places your money can go.
Investing in yourself
Part of an effective savings goal can be finding ways to invest your money so that it is not all just sitting waiting to be spent. Typically, this could be savings accounts or low-risk investments like GICs and bonds. However, with a little creativity, you can find ways to make extra money through other forms of investments such as upgrading your education/professional skills to receive a higher salary, starting a business (with the internet you can sell and resell just about anything with ease) and so much more.…