To manage personal finances is a battle often lost because of a lack of skills. If you are of the opinion that you can keep track of your personal budget in your mind and not by writing your expenses down, then, unfortunately, you are following a losing strategy. Managing your life’s expenses and savings should be done like running the finances of a business. Your kids should also start learning these skills from a young age.
Take time every month to sit down and do your personal budget. You will be surprised how much you spend versus your savings. It will turn your money situation around. Follow these steps to manage your personal finances:
- Document your budget every month in Excel. Start fresh and keep book of all your finances. Each month sit down and compare your budget with the previous month. Everything needs to go into that budget, from buying birthday presents, to school outings for your kids. You should note your entertainment expenses, habits like smoking etc. These are normally the small amounts but you don’t realise that they add up to a bigger amount you initially thought.
- Understand your income and expenses. You only get X-amount of money in but you spend Y-amount. It all needs to balance out. Don’t spend what you don’t have.
- Consolidate your debt. It is easier to manage something if everything is in one pot. Try to consolidate your debt and get rid of extra credit facilities you don’t really need. You don’t need a credit card at every bank or an account at every store.
- Set a money goal. Work towards an objective as part of your savings. Life is so volatile and anything can happen. To have a safety net is freeing and when retrenchment or job loss happens, you can be sure your expenses are covered while you look for another income. This gives you peace of mind.
- Cut unnecessary expenses. You would be surprised to know how little you can survive on every month. We are not saying you can’t enjoy life. You work hard for your money and you can spoil yourself now and again, but flashy new clothes, jewellery and frequent dining experiences are not needed every month. Be more conscious of what you spend and how often. Stop. Think, and reconsider if you really need it before you buy it.
- Evaluate your expenses daily. Take a minute or two every day in the evening to calculate your daily expenses. Ever felt like you just withdrew money and suddenly you have nothing left, but when you think about it you don’t know where it went? Keep your slips and recalculate your daily expenses. You will be amazed at how more conscious you become of your expenses.
- Make sure you allocate enough money towards your financial planninglike pension and life cover. A lot of people think they are still young enough and there is still 30 years left before retirement. Everyone knows that time flies and when you wake up one morning you are 65 years old with no pension fund and no life insurance. Then it is too late to turn back the clock. There is no time like the present to get your personal financial planning in order.
Being in charge of your own finances leaves a lot of room for various temptations but where there is a will there is a way. Sometimes all that is necessary is just a heart to heart talk with yourself and persistence in breaking bad habits.
The Mindspa Institute offers The Personal Finance Management training course and it is designed to equip the delegate with the knowledge and understanding of financial stability and viability.