Financial health is a critical part of smart living and achieving goals. Having an income without managing your finances can lead to challenges that can compromise your future plans. Hence, it is important to practice personal financial management as a life skill
It’s never too early or too late to focus on financial health. Saving for what matters to you is a great way to set financial goals.
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How You Can Start Managing Your Finances and Increasing Your Savings
1. Track Your Spending
Start by understanding your current financial status. How much income are you expecting in a month and how much are your projected expenses for your needs as well as your miscellaneous purchases?
Track what you are spending money on and what the big expenses are in your current finances. There are many different ways to track your spending. For starters, you might need to bring out all your bank statements, payslips, and bills from the past 3 or 6 months. This may sound tedious, but if your goal is to get a hold of your finances, you need to get used to it.
You can list down your spending on paper or use digital tools like a spreadsheet. Many banking apps also offer services that allow you to monitor your payments and expenses. There are also apps available that can make financial tracking more detailed and easier to understand.
2. Eliminate Debt
Credit can be part of building stable finances, only if it is managed properly. It is always ideal to avoid debt or eliminate it as quickly as possible. This may seem like a challenging undertaking that will take forever to achieve, but baby steps can make a difference.
Only take loans that you need and can repay immediately. Having to pay loans with high interest over a long period of time can be burdensome and significantly strain your budget. Create a realistic schedule for yourself to set aside money each month to chip away at debt. If you have accumulated several debts, consider getting a debt consolidation loan. But be mindful in doing so and only choose a loan that will significantly help you clear your debts faster with a lower total interest rate, and not burry you deeper into debts.
3. Set Goals
Set financial goals for yourself. Consider your dreams, aspirations, and where you want to be in three, five, or ten years and beyond. This will determine how you save and manage money.
Perhaps you want to purchase a home, retire early, and save for long-term goals. Or maybe you want to plan for a family or start a business venture eventually. It’s okay to target major objectives, as this will help you work harder and practice discipline, especially when it comes to saving. But remember to only set a financial goal you can keep in the long run. Establish the specific milestones you need to achieve in order to fulfill those goals. Break your goals down into small, achievable steps. For example, you can start saving as little as 5 to 10 percent of your earnings, then increase it year by year.
4. Make Saving Consistent
In managing your finances, consistency is key. Create a schedule for setting aside money in savings every month and stick to it. Some current or debit accounts allow you to automatically set up your account or payments to put a certain percentage or amount in savings. Make use of this feature if your bank offers it.
If possible, consider getting a 401K or IRA with payments automatically taken out of your paycheck. If your company matches your retirement savings to a certain point, match it to the fullest. It’s free money, so better take it. When you take these retirement plans, you are being obliged to save for your future. This makes saving easier compared to seeing it as something optional.
5. Find Additional Income Streams
The gig economy has been booming and is further set to grow post-pandemic. More people are rediscovering work-life balance and flexibility and finding new income streams that will allow them to earn even at home. If you have spare time, you can also consider taking on side hustles like freelance jobs to earn some extra money. Hobbies or passion projects, like knitting, painting, writing, photography, video editing, or even software development, can be turned into a profitable business. Just build your portfolio and get visible online.
If you want to start a business but aren’t sure where to start or don’t have any ideas, another great way to make money is to look for franchise opportunities. A franchise allows you to run a small part of an already established business and brand, so all of the setup has been done for you. However, you still have the benefit of being your own boss, so you can work on the franchise in your spare time. A great way to find franchise opportunities like this is to use websites like www.franchiselocal.co.uk, which specialise in linking potential business owners to franchises.
If you do not have the time, you can also consider investing in assets, like stocks or renting real estate as a way to exponentially increase your money. If you want to explore something new, crypto trading and investing are making a buzz and are worth checking out. Nowadays, there are apps available that can make investing in different assets much simpler and easier. You can give these apps a try and see what might interest you.
6. Establish a Budget
Budgeting is among the basics of managing your finances, but it can also be the most challenging one. It can take a lot of work to monitor your monthly income and spending. Try to create a realistic budget based on what money you have coming in and your essential expenses. Should you have the extra, determine how much money you want to save/invest. If possible, you can include miscellaneous expenses as well.
It is likely that you will need to make some sort of lifestyle adjustment to accommodate your budgetary needs. You might need to let a few unnecessary subscriptions go and skip the mall’s sale offer at times. Of course, only cut spending on things that will not compromise your health and comfort. Even so, be adaptive and flexible when setting your budget, as it may need adjustments as your life circumstances change as well.
Keep Managing Your Finances and Watch Your Savings Grow
Saving and managing your finances can be tough, especially when you’re just starting out having income or have limited profits. Personal financial management does not have a one-size-fits-all solution. It is rather a trial-and-error of different budgeting, investing, and saving methods until you find one that works for you. It’s a matter of prioritization. Just keep at it and focus on your goals. Soon, you’ll be boosting your savings enough for the future that you are aiming for.
