The saying that ‘it’s the little foxes that spoil the vine’ is usually true for many people when it comes to managing your finances successfully. Many people end up filing for bankruptcy because of things they could have avoided. Managing your finances successfully is not a mammoth task when you put your heart to it. All you have to do is keep your records, collect your bank statement and credit report, follow simple steps outlined below and you could end up being a successful financial manager of your own money.
Tips to manage your finances successfully
Many people hate the very sound of this word but it is not as complicated as it sounds. Just sit down and jot down what you need to have on hand; that’s planning. If your things are all piled up, sort them out first and file them, if possible. You already know your goal of managing your finances better, so all you need now are the income and expenses records. Managing your finances is more like preparing a personal income statement. When you have your documents in place you can move on to step 2.
2) Income and expenses
Know your income; i.e. how much you earn and any other income that comes to you monthly. Don’t include income that is not certain; account for it when you have it on hand. Jot down your monthly expenses. Your credit report and bank statement can help you remember some of the expenses that you have forgotten. Have your checkbook/stub on hand to assist you in case some things are not yet on the bank statement. Include any interest that accrues because whether you pay it now or you don’t, it will have to be paid. Add your income and your expenses together to get the ‘net worth’ position.
3) Analyze your finances
Now that you know your monthly ‘net worth’, it is now time to make decisions. What can you do to increase your income? Many people do not have a choice when it comes to this, but you could have. Do you have any unwanted clothes, property or books which you could sell and make some little income? Can you afford to work an extra job to boost your finances? These are some of the questions you need to ask yourself. On your expenses, surely you can do away with some of the things like gym subscriptions when you do not have time to go to the gym and magazine subscriptions when you don’t even browse through the magazine. Go through you’re your expenses one by one and see if you need to spend that much.
4) What to do with extra income
Assuming that you are one of the lucky ones with a positive net worth, don’t put any extra income into a savings account when you have interest bearing debt. That is poor financial management. First pay off that debt, then save later. This is because interest on debt is usually higher than interest on savings. If the debt is not interest bearing then you can defer paying it off up to the time its starts bearing interest. The little interest you will earn will help pay off the debt.
5) Process should be revolving
Congratulations, you are now a good financial manager of your personal finances. Don’t stop there. This should be a revolving process so that you don’t have a relapse. Keep on paying your bills on time and saving the rest.
Managing your finances successfully is the key to your personal success. If it is too much for you, get professional help. The little fee you pay is less worth than the problems that you will avoid.