For many people the mention of personal finance is akin to some unsolvable puzzle that bothers them at odd times. The thought of sitting down and planning expenditure is scary, and the idea of pre-paying the credit card bill, an alien concept. Such people are sitting ducks for target practice when finances go awry. It is in your own best interest to learn how to handle your personal finance matters effectively. Here are some tips that you can use.
Be Aware of Income and Expenditures
In order to understand your finances you need to know what money is coming in and on what it is being spent. It is a good idea to sit down with a pen and paper and list just how much money you have access to each month. Include the money that comes from your salary, any interest you get on savings, and any other sources of income you may have. Even if it is an irregular source of income, make sure you record how much you earn from it. Similarly make a list of all the main expenditures you undertake monthly. The rent, utilities bills, school fees, groceries, and medical expenses; make sure you list everything. Specific annual payments such as insurance and taxes should also be included on the list. You can revisit the list at a later date when you remember some that you originally missed.
A Budget is Important
Once you have a good idea of how much you are earning and where it is being spent, you can make modifications. Divide the wants and the needs. The needs are the basics without which you are unable to survive. Everything else is a want that is bought to make life more comfortable or as a luxury treat. Look at wasteful expenditures and see where you can trim it. How many movies do you see per month? How often do you eat out? Are you spending a lot on hobbies which do not offer any monetary returns? Ask yourself some tough questions in order to cull out expenses that you may not really have to make. Now allocate a fixed amount for all the expenses that you feel are a must. Now this part is important, stick to this amount each month. It will take a while to get used to a budget but in the long run it will be well worth it.
Investing for the Future is a Priority
An important goal of handling personal finances effectively is being able to invest a part of your income regularly for the future. The nest egg you have accumulated is your hedge against a rainy day. We are not sure what kind of emergencies may pop into our life at any stage and it is well worth having an emergency stash of cash or savings that can come in handy at such a time. The amount you save each month is not important, but it is important to be regular with your saving habit. Even twenty bucks invested per month can add up to a big total of two thousand four hundred plus interest over a decade. So make it a point to save something regularly. This will make a huge difference in how you handle your personal finances.
About the Author
Sarika Periwal writes better and sensible living articles to inspire people to make sound financial decisions. Consider using the services of professional commodity brokers to make your investments through. They can provide solid advice and secure returns.