How to manage your personal finances wisely

Personal finances

You can make a lot of money but if you do not know how to manage your money, you will encounter difficulties. To manage your personal finances well is essential to advance and not to be a simple average consumer.

If you are about to get your finances in order and optimize them, it’s probably because you have a plan in mind. You need motivation. This motivation can come from goals that you have set, such as becoming financially independent, leaving your comfort zone and going around the world next year, buy an apartment etc. Whatever your goals, find a reason why you need to optimize the management of your finances.

To overcome the challenge of personal finances, nothing beats good planning and motivating goals.

1. Define your financial goals

Buying a first home, starting a family, retiring at age 60 or traveling several months a year: these are all goals that make you dream. If one wants to realize one’s dreams, one must start by setting financial goals. Also, good financial planning is the key to success.

When defining your goals, you have to think in the short and long term. What do you want to accomplish in the coming months? Can you save enough to afford the much-deserved trip after a busy year? Should you instead start contributing to an RRSP? These are short-term goals.

Those who are beyond the six-month or one-year horizon are in the middle term, for example buying a first home in three years. In the long term, it is normally our life projects.

The benefit of setting financial goals is to realize what financial measures are needed to achieve them. If buying a first home seems unreachable when you’re 20, it becomes more realistic when you set a monthly savings schedule.

2. Make a personal budget

The personal budget is the everyday tool to achieve its goals in the short, medium and long-term. It keeps track of our income and expenses and gives us a clear picture of our financial situation. Many people avoid making a budget because they believe that it is necessarily binding. A budget is above all a matter of choice. We must first stop prioritizing spending, and then have the discipline to make consistent decisions every day.

Personal finance advisers also agree on the importance of establishing a financial cushion that is equivalent to three to six months’ salary, for contingencies. If you lose your job or a loved one falls ill, you can continue to pay your rent and expenses until the situation is restored.

3. Understand the rules of saving

The budget also includes the savings. Saving early is a highly profitable strategy because every year, you usually make a little profit from the money you save. Because savings usually generate interest. For example, if you save $ 10,000 at an annual interest rate of 2%, you will have $ 10,200 at the end of the year. You are getting $200 more without any effort. If we repeat the operation every year, the amount that becomes fruitful becomes even more important, especially if we regularly save.

4. Reduce and eliminate debts

Do not wait until the debts crush you before taking the situation in hand. Eliminating them as soon as possible will have a lasting impact on your future financial health since the longer you drag a debt, the more expensive it becomes in the end. It is possible to reduce one’s debts by cutting some non-essential expenses in one’s budget, by always paying the minimum and repaying the largest loans first.

5. Manage your money according to your profile

If you are a student you must have to juggle classes, jobs, part-time work, tuition, and books that are sometimes very expensive. To avoid getting lost in the whirlwind of a young adult’s life, an adopted budget is the key. A student can focus on his studies, without financial worries. Many students even choose to work only in the summer, as they plan their spending well throughout the year.

If you are a parent the birth of a child causes a lot of upheavals, especially in financial terms. Not only does it cause a lot of expenses, but it often causes a drop in income for parents, who take parental leave. According to a study a toddler can incur up to $ 3,000 in extra expenses per year for a household, while it takes about $ 4,500 a year for a teenager. It is better to plan it in your budget if you plan to start a family.

If you are retired the retreat is obviously made for fun, but that’s no reason to lose sight of your finances. Retirement is often accompanied by a decline in income, so expenses must also follow. Of course, a well-planned retirement will be more enjoyable, as it will not result in a significant decline in the standard of living. That’s why starting to save early should be a winning strategy for everyone’s lives.

Signs that your personal finances are doing poorly

  • When there is a balance on the credit card at the end of the month: The credit card is a source of short-term credit that should be paid back monthly. Interest rates are too high to make another use.
  • When you are unable to save: Savings should be a budgeted habit in the same way as any current expense. We deserve, after all, that a portion of the hard-earned money goes towards our projects, not just the cost of living.
  • When there is a gap between your priorities and the reality: if you are feeling overwhelmed by your financial situation because you are unable to invest in what you deem important, is undoubtedly a big red flag.

Conclusion:

From a personal development perspective, we all need money to make our projects a reality and achieve our goals. It is possible to have projects that do not take into account money, certainly, but in our life, money allows many things. To find accommodation, to plan a trip, to organize a wedding, to invest, to even simply, to provide for one’s needs, money is necessary. Money is not an end in itself, money is a means.

Familiar With Personal Finance Management – Are You?

Personal Finance Management

Managing your savings well can mean many things, from being careful to save to achieve your short and medium-long term goals, to have a smart investment plan.

We are forced to manage our savings and often, given the times, to invest them in the hope of getting something more. But how many are we really aware and prepared on the subject? Proper personal financial management tips are essential to face the problems of each month with serenity and the unexpected always lurking. The software helps if used to deal with situations with a method.

A few Tips To Finance management

Proper personal financial planning is made up of many small attentions, dedications and perhaps the help of some specific tools, but the main component is our attitude and our behavior. The personal financial management tips planning is not made of great secrets but from many small measures, common sense and tricks that we all know but it is easy to forget. It is not always easy to save money for renovations, but home-spending software is a great tool to help you manage your savings better.

Understand your financial choices

To understand what is best for you, you need to start from the basics. All this, through simple questions such as: “For what type of expense, you find yourself more comfortable between, for example, holidays, the new car or insurance for our children?” “When you save a figure, even if small, do you prefer to spend it on a short-term pleasure or a long-term peace of mind during retirement?

Organization

After understanding the objective to be pursued, you need to understand how to achieve it, without losing sight of it, by implementing an attack plan. The beginning of all this can simply result from greater daily attention to the use of your money. To know in fact what are the everyday expenses that you can exclude is the easiest and fastest way to start saving without any sacrifice.

Weaknesses

Once you have categorized your every expense, you can understand where you can save and where not. It would be enough to simply use some tricks such as not using a credit card in stores but only cash or trying to buy basic necessities when they are in promotion. Monthly expenses, or in any case on a fixed basis, are a part of one’s own important and difficult budget to manage.

Your future

Applying all the “tricks” exposed up to now is not easy, but it is the best way to achieve a result in the future. It does not matter your age or the type of work does because the sooner you start the better you get. One of the most pressing needs in the personal financial planning of a young person is the purchase of the first car, a symbol of independence and perhaps also of freedom.

Increase investing

The best way to fully exploit the potential of your savings is to invest. The market helps us in this, also providing us with highly efficient and well-diversified tools that help you to receive attractive returns without taking too much risk. Financial investment experts all agree to stress the importance of starting to save money as a young person, to have a stronger foundation for the future. Yet today’s young people do not seem to start saving before their parents, indeed, they always start to worry about their personal finances. Once your savings have grown enough, the time has come to invest them.

Set a savings goal

Some people are hardly motivated to save money, especially in times when there are so many expenses. But this should not stop you from doing it. Setting a goal is a simple and useful method to help you and increase your motivation. In this way, rather than thinking about the money you will have to keep aside each month, you can concentrate on what you can do once you reach your goal. Investing your savings is a smart choice because it will allow you to guarantee their value over time and not let it fall due to the inflation effect.

Conclusion

Personal Finance Management Tips allows you to monitor your assets and improve your financial situation. For monthly cash flow, you mean the difference between all your income (salary, interest, royalties, etc.) and all your expenses (rent, bills, and miscellaneous expenses). As easily understandable, your goal must be to grow cash flow as much as possible in order to grow your assets and improve your financial situation.

All of the above does not work if we do not commit ourselves to pursue our goals every month. Often this is difficult, but there are various ways to not give up. The first and most important is to always keep in mind the goal and make it as real as possible, that is not to say that you want to accumulate a certain amount but allocate it to something material, like a house, a car or other, giving space to your imagination and your needs.

Top Books to read absolutely on Wealth, Success and Personal Finance

Personal Finance Books

Economics and finance influence politics but above all naturally the daily life of each of us. This is why it is important to know the basics of the economy. Often, however, this subject is neglected in the school programs: therefore it is necessary to gear up as self-taught.

The titles dedicated to the world of economics and finance are really endless and sometimes you do not know where to start. But here you find a selection of books for non-professionals. They are essays dedicated to the economy, its history, and finance. In short, if you are looking for texts that explain economics and finance in a simple way, here are a few economics books for beginners and enthusiasts, in order to start off on the right foot. The personal finance books are there with all the supports.

Rich father, poor father – Robert Kiyosaki

Start with a classic, almost a novel. This book starts with financial literacy that is unfortunately not available in schools. The councils are therefore dispensed in an anecdotal manner, always underlining the importance of achieving financial independence and illustrating some principles on how to obtain it.

The richest man in Babylon – George S. Clason

This book aims to solve personal problems related to money through the eleven ancient Babylonian parables. Clason returns to Babylon, where he supports the roots of our systems and our monetary beliefs and, studying with him their ancient anecdotes we can, as we were citizens of that great civilization, appreciate the value of money, acquire sound procedures of financial management and earning more.

The Millionaire of the Accanto Door – Thomas J. Stanley

The book traces seven simple rules to follow in order to become wealthy people with a net worth of over one million dollars. The book is, in fact, a research done by the two authors on the profiles of some millionaires.

The automatic millionaire. A one-step plan to get rich – David Bach

As the title clearly summarizes, the author is a great proponent of the need to automate his financial life between savings, common sense, the ability to live within their means and the understanding of the concept of “always paying oneself first “.

How to treat others and make friends – Dale Carnegie

The book was first published during the Second World War but is still a best seller to date. What does this book focus on in a list of texts on personal wealth and finance? In fact, it is not strictly related to the management of money or investment the pursuit of financial freedom goes beyond what is money and financial techniques. It also includes psychology, the motivation of life and the stimulus towards the pursuit of a happiness that seems increasingly elusive.

A stroll through Wall Street. A random walk down Wall Street – Burton G. Malkiel

This book is an interesting read for all those who want to understand more about why it is almost impossible to beat the market and why to follow the advice of some gurus, can be detrimental to their financial health. The author dives into the maze of behavioral finance, which studies the social psychology of investment decisions.

Rise and decline of money. A financial history of the world – Niall Ferguson

Knowing history, believe it or not, is now more important than ever and Ferguson illustrates here his studies of courses and appeals of the financial history of our world. It also goes from the dynasty of bankers who financed the Italian Renaissance to the economic bubble that caused the French revolution. Here you find things about our expansion that few have written before and as mentioned, there has never been a better time to understand something about the rise and decline of money.

Think and enrich yourself – Napoleon Hill

A motivational best-seller on personal development with over 50 years of life inspired by a suggestion from billionaire Andrew Carnegie, owner of the world’s first billion dollar company. Hill has studied the characteristics of those who have achieved great wealth and developed thirteen principles to allow anyone to achieve success.

Do you have a parachute? The art of finding your work – Richard N. Bolles

Since many cannot or simply do not want to become entrepreneurs, this is the bible for job hunters or people looking for changes in their careers. The latest published edition was clearly written taking into account the many people who have lost or are at risk of losing their jobs due to the economic downturn since there are also tips on how to tackle difficult times and save money.

The seven rules to succeed – Stephen R. Covey

Covey tackles the topic of success with an almost holistic approach, focused on solving personal and professional problems. With insights and anecdotes, he reveals, step by step, how to live with fairness, integrity and other principles to achieve the security necessary to adapt to change, gaining wisdom and ability to exploit the opportunity that change itself creates.

Conclusion

If you do not have a plan for the future, someone else will have it for you. The first step to changing your financial situation is to take responsibility for your life, design your future and act in a structured way. Have you ever thought about what would happen if you stopped earning suddenly? How many months, how many years could you survive, keeping your lifestyle unchanged? There is a formula that allows you to know it.

Money is just an amp of what you are. It is the mind that makes you poor or rich, happy or unhappy. Money is a result that depends on your actions. And your actions depend on your psychology. These things also for play, influence your relationship with money. And they have an impact on your results. To earn figures you never earned, you must become a person you’ve never been before.

Top commandants for your personal finance

Personal finance

You can make a lot of money if you do not know how to manage your money, you will encounter difficulties. To manage well your finances is essential to advance and not to be a simple average consumer or even worse to be prohibited from banking. First of all, you need motivation and willpower. If you are about to get your finances in order and optimize them, it’s probably because you have a plan in mind. You need motivation. This motivation can come from goals that you have set, such as becoming financially independent, leaving your comfort zone and going around the world next year., buy an apartment. Whatever your goals, do you find a reason or several valid reasons why you need to optimize the management of your finances. There are plenty.

Wages do not make wealth

Touching high pay every month does not automatically make you rich. Just as being paid more modestly does not necessarily make you poor. “All that matters is the proportion you put aside from your salary.” Your personal savings must follow the principle that they are worth more than your investments. “Pay yourself first before placing money”. The best investment decision would be to impose a high rate of savings. This provides a huge margin of financial security.

Save a little more each year

The trick is to increase your savings rate with every increase at work, for example. And the enrichment strategy will remain incomplete if you do nothing to improve your professional career. “Too many people are stuck in this state of mind that they cannot find a better job, take on more responsibility or earn a higher salary. It’s insane. Moreover, no one should think about retirement, but each of us should aim for financial independence. “The goal should not be to do everything to get out of the sun. But rather to reach a level where you no longer have to worry about money.

Money outflows or expenses

This corresponds to every transaction where you lose money. These are your current expenses such as rent, shopping, transport, telephone … But it can also be a week of vacation punctually or money that you spend on an investment or a credit that you repay for example. In short, it’s negative on your account.

Inputs of money or income

This is every time you make money. This is usually at your salary and is often fixed but can also be variable. If you are not in the rat race, you still have money entrances. In fact, the salary is a cash entry, but the money inflow is not necessarily linked to a salary. Example: interest of a stock market investment, rent of an apartment, income from an activity on the internet, sales of furniture you get rid of … In short, it is positive on your account.

The concept of assets and liabilities

Indeed, if you spend money to buy a consumer good whose value will diminish over time, it is not the same thing as buying for the same price a case of wine or a work of art whose value will increase. Yet on your bank account, you may have spent the same amount. Similarly, if you are lent money with a 5% interest rate and you earn money it is not the same.

Yet you will have the same money entry at the moment. You must know how to differentiate an asset from a liability. An asset is something whose value will grow or is likely to generate income. A liability is an expense whose value will decrease. The passive is ephemeral and easy, while the asset is patient and thoughtful.

The importance of savings

Saving makes it possible to build up capital. This capital will then finance any project. This can finance the acquisition of an asset or not. Simply saving is beneficial in the sense that it opens up possibilities and allows you to see each savings a little further. Be careful, saving is very useful for managing your finances, but keep in mind that saving is not an end in itself. Saving for saving is futile.

Establish a budget

To manage your finances, I advise you to establish a budget. Establishing a budget can be done very simply. You must avoid the gas plant and do something simple, clear and legible in order to appropriate it.

Here’s how to make a budget in a few steps:

• Take a sheet and a pen
• List all of your cash entries
• List all of your cash outings
• Define what is fixed and what is variable
• Set your savings goal
• Reduce variable expenses and limit unnecessary expenses
• If you want to deepen you can create categories (leisure, food, house, transport …)

Your budget should not be too restrictive

Be regular and go step by step. If you want to protect yourself into the future, you can establish a forecast based on the existing and accumulated savings. Be careful, saving does not mean living in deprivation all year long. Nothing is good in excess. It’s the same as with food. Rather than impose an ultra-restrictive diet and make a “yo-yo effect”, eat healthy continually giving yourself some pleasure from time to time.

Write all your sources of income

The first rule of debt management is to know your net income. You had to know how much money you make per month to know how to properly plan your expenses. The question you had to ask yourself is: how much income do you have and how much do they bring back to you per month?

Conclusion

Following your budget is important, but we do not want to spend too much time on it. Make permanent savings transfers at the beginning of the month then pay the rent or refund your monthly payment if you have a loan to repay. These actions there, you can do them at your bank.

You simply have to focus your purchases on the goods needed for life. Now, before buying, ask yourself if the product you are buying is vital. If you do not really need a product to live, do not just buy it.

To be successful in your personal finances, you must change your habit and start looking at your money from another angle. You had to write your different sources of income and especially how much each one of them brings you.