Unfortunately, there are too many people who live from paycheck to paycheck. The only reason why this happens is because they lack proper personal finance skills. Note that this is usually the main cause of stress in someone’s life. A lot of people never learned valuable lessons about personal finance from their parents, so they think they’re doing the best they can with what they have. Nevertheless, as long as you have a job you can always find ways to start saving money. Here are some personal finance tips you should follow to start living comfortable.
Create a Detailed Budget
You’ll never be able to manage your finances if you don’t have a detailed budget. To do this, you will have to track all of your expenses for a month. Make sure you writing down the cost of everything from your electric bill to cereal. Keep in mind that every item you spend money on should be written down, even if it’s just pocket change for a morning coffee or pretzel. Knowing exactly how much you earn and spend on a monthly basis will help you create a detailed budget, which you can later modify to meet your financial goals.
For instance, if you want to start saving more money, you can simply divide your budget into essential and non-essential items. Figure out what you can live without and don’t spend any more money on it. Of course, another way to start saving money is by earning more. Note that you can be in a much better financial situation if you become a freelancer or find another job you can do part-time.
Pay Your Bills on Time
You should always do your best to pay your bills on time. In fact, it’s recommended you set any bills you can to autopay. By missing a payment, you may get penalty charges, which are known to be high. Not to mention that you’ll have to prove you pay your bills on time in case you’re thinking about applying for a loan soon.
Invest Ten Percent of Your Earnings
It’s a good idea to set aside ten percent of your earnings each month for making investments. This is an excellent way to make the most of what you earn. Keep in mind that investing is completely different from gambling and is in no way a get-rich-quick scheme. It’s about planning for a later time in your life. While spending money may give you instant gratification, investing it will ensure a brighter future. There are countless ways to invest, from putting money into bonds, stocks, and mutual funds to buying real estate.
Clear Your Debts
If you want to get your finances in order, you should make paying off your debts your main priority. This is especially true if you have any expensive outstanding debt, since you’re practically throwing your money away by paying high interest rates. In case you want to clear your debts quickly or avoid bankruptcy, you can get an IVA – short for individual voluntary arrangement. This is a contractual arrangement with creditors that can be very flexible depending on your circumstances. By opting for this formal debt solution, you will be obligated to pay affordable monthly payments to an insolvency practitioner.
Avoid Impulse Buying
Being good with money means thinking about every purchase you make. Impulse buying is an awful habit that will create nothing but problems for you, which is why you should never do it. Just because you saw something you like at a store doesn’t mean you need to have it right away. Check your budget and figure out when you can save money for it. This is also a great way to see whether you really want a certain item. If you still think it’s a good purchase to make a month later, you should definitely buy it. In case you determine you shouldn’t spend money on it, then you never really wanted it and would’ve wasted your hard earned cash.