Best Ways to Manage Personal Finances

Something that many people struggle with in their day-to-day lives is the topic of personal finances. You may see that new shiny electronic device or some new article of clothing and get the impulse to buy it. The problem is, when you or anyone else makes a rash decision like this, it may or may not come back to haunt you…

The importance of being wise with personal finances

It is, of course, important to have money, as money in some sense rules all aspects in society – from where we live to what we eat and to what we can and cannot do. However, one has to understand that being frugal and making wise decisions when it comes to personal finances is important in the long run, and even for the next day.

Managing your personal finances wisely will help keep you out of significant trouble, and debt, and keep you away from being another statistic-one who owes thousands in credit card finances or any other kind of debt.

Put it down in writing

First and foremost, when it comes to personal finances, it is best to make a list of necessities and wants that cost money.

Of course, it is always nice to have certain luxuries, such as brand name household items, or that new CD, or anything else; but if you are going to manage your finances well, you need to weigh out everything appropriately. You need to look at daily costs, such as gas, food, house bills, phone bills and the like.

Analyze your budget

Take a look at what is necessary, and how much it is going to cost you each week, or each month if you prefer. Calculate all of these things together, and then calculate the amount with your income.

One problem that many people have is not doing this, and then they find themselves borrowing money, taking out loans and credit cards for things they may and often may not need, and digging themselves deeper into debt.

By looking at your weekly costs of living with your monthly income, you can better assess how much you need to spend, and how much spare cash you will have.

Tips for saving your costs

A few ways to help manage your personal finances, in addition to keeping track of your spending, is to find simple ways to save money.

For instance, a membership to Costco or Sam’s Club is a great idea. Buying things in bulk on average can save one a few dollars a year-or even simply searching for cheaper prices if one does not want to splurge on a membership.

By simply looking for cheaper daily goods at your local store, you may find yourself saving a hundred dollars a month, giving you some extra spending money, or money to put into a savings account.

Managing your expenditures

Another example that many people go by is when it comes to shopping. Say for instance, you want a new pair of shoes. Some people like to impulse buy and immediately buy the shoes, and then it ends up in their closet never worn, never used, and the tags still on them.

A simple rule of thumb is to look at the price, then judge how many times you will wear them, or for anything else, use the product in question. In addition to this, in case you find yourself in the situation where you never wear or use something, it is important to keep the tags and save your receipts. You can end up returning some things later and getting the money back, which is a nice surprise later on if you find yourself hurting for money.

Getting your savings banked

Another important thing when it comes to managing your personal finances and being frugal, is to open a savings account. Even a few dollars a week can gain interest, and you will later on down the road find yourself with a little more money than you began with.

Perhaps you may want to make a commitment to setting aside a little bit of your paycheck each payday for the savings account. That way, when you really need money, you will have a nice security blanket to fall back on.

How to deal with credit cards

Also, when speaking of bank accounts, it is also a great idea to open a low limit credit card. Building credit is essential if you ever have plans to rent or buy a home, or get a car.

By simply charging a tank of gas, or something small every month and then paying it off before interest rates set in, you build your credit. Then later on, when you need to take out a loan or finance something, your credit score exists, instead of many people who believe that never taking out a credit card is the best idea.

Balance versus Extremism

When it comes to credit cards, it is more of a balance than extremities, such as never having one, or maxing out a large amount of cards.

With credit cards, it is important to be frugal, and remember that even though you can charge them and have the product or item in your hand at that moment, you are only borrowing money, and will have to pay it back in the near future.

Sometimes the price to pay back something you so desperately want costs a lot more than you originally paid because of interest rates.

Forethought and planning is key

Another important factor in managing your finances that does not come at any cost to you, is planning. Make a promise to yourself to always think things through before you buy, and to shop around before making any commitment to buy.

A lot of people learn this the hard way-such as impulse buying, or never thinking twice about a decision that involves money.

Say for instance, that John Doe wants to go out with his friends for the weekend, or for a fun night on the town, but he knows he has to pay bills and buy groceries. Now, any normal individual would not pass up the chance to have fun, regardless of if it costs money or not.

Or, let’s say that John Doe has a credit card with a nice little spending limit. It is very crucial that he thinks things through before he goes through with any plans. Anyone, including John, would not want to have bills piling up and then be in a world of hurt when it comes to finances.

Remember, a credit card IS indeed borrowed money, and necessities should always come before luxuries.

What John Doe could do is pass up the chance, and say he will catch his friends on the next opportunity around. You would be surprised how much people understand when it comes to situations like this.

Don’t shy away from freebies and discounts

One more thing that may help in managing your personal finances, is to do a little hunting for free stuff, free services, or even discounts.

1. Online Hunting

A great place to start is Craigslist. Many people offer services like haircuts, or something of the sort, that most would pay for. A lot of people also give away a lot of stuff like furniture, or household items, instead of just throwing it out.

Now, it does not come easy, you do have to do some searching around for great opportunities, as you could come across a lot of junk. But, with a little time and patience, you may find yourself with somethings you would normally have to pay for.

In addition, there are websites out there that are dedicated to coupons, and free samples and what not, or free lunch and dinner from restaurants. Sometimes, you can find some free food from your favorite restaurant, or a great discount, which could lead you to more money freed up to you.

2. Offline Hunting

Maybe you aren’t the type to look up free stuff online, or don’t have a computer. Then a small step you can take is when going out or buying something, as mentioned before, is to hunt around for a good deal or to cut back on some things.

For example, when going out to eat, take advantage of the lunch specials many places have, or order water instead of that fancy lemonade or soda. If you go out to eat a lot and always get a drink, that’s at least two dollars on average each time. Within a few times of going out to eat, you can find yourself affording an additional time to do so, since after all, water is free at most restaurants.

Basically, when spending, it all comes down to thinking things through, and being careful not to splurge way too much. As previously mentioned, some thinking through, researching and planning will go a long way and help you in the process of managing your finances accordingly.

Things to remember:

a) When it comes to managing your personal finances, the main thing to remember is to be frugal with your money and spend it wisely.

b) It is important to keep track of how much you spend, when you spend, and why you spend.
Do you really need that new phone or that flashy new product? Be careful not to fall victim to advertising as well.

c) Remember, thinking things through instead of making monetary decisions impulsively and rashly can really help you out in the long run. You do not necessarily have to live off Ramen noodles and bare essentials like many of us claim we did in college, but being careful and cautious is always the best plan.

d) Also, one more important thing, that not many people may understand, is delayed gratification. Basically, it means when you wait for something, and then finally do it at a later time, it is a whole lot more satisfying. Such as saving up money and then getting that flashy new item, or for instance when you wait to eat that last piece of cake in the fridge after running a few miles.

As mentioned before, putting necessity before want is always the best idea. Of course we are all not perfect, and we all make mistakes, but planning is always the best option. Even if we do come across some debt and find ourselves in a small (or large) financial rut, we can learn from our mistakes and with the suggestions mentioned previously, help ourselves better manage our personal finances.