How to manage personal finance?

Personal Finance:

“Process of managing one’s financial activities like his savings, budgeting, investments, and possessions”. But the most FAQ that comes why to manage personal finances?? The people who don’t know the answer and keep going without managing finances, repent at the end of their life and become miserable. It’s a nonsense to wait for a windfall. By maintaining financial security, one can acquire the life he wants to live.

In simple words,” Finance is all about managing money.”

To remain financially healthy, we need to learn how to manage our finances effectively to get the most out of them. Reducing expenditures, improving, and saving investment preserve one’s life in crisis. Planning your finances helps you to achieve your goals and keeps you financially secure. Money comes either from job income, business, or inheritance. There are two types of finance;

1. Public finance
2. Private finance

Public Finance includes government institutions, state government, local set government, central government, etc. In public finance, the government adjusts its spending pattern considering and analyzing all key components. Government takes solid steps to maintain the economy of the country.

Private Finance includes personal finance, business finance, non-profit organization finances, etc. Individuals themselves adjust their expenditures according to their income. They want to enhance their profits and spend less money to maintain a surplus budget.

Importance of personal finance:

• Improves your quality of life
• Helps you to achieve your short-term as well as long-term goals. Paying rent, paying bills, offspring school’s fees, buying a bike/car, etc. that comes true in no time are short terms goals. Long-term goals that take much time to achieve
• Organized finance saves your time, makes you stress-free, and enhances your income
• Saves you from debts of high-interest rates in the upcoming crisis
• Achieving financial success. Financial success does not sum up a large amount of money but it is about how to purchase goods and spend monetary resources over time in different situations.

Personal finance management is not important only for big stakeholders or businessmen but salaried-class people can avail themselves as well. Mostly, salaried-class people are going through debts. The reason is that they don’t manage their finance. There exist several strategies that will assist you in managing your budget.

How to manage personal finance?

1. Assess your financial assets

It is of great importance to know your net worth before diving into finance management. After determining, it becomes easy to make monetary plans or decisions and keep yourself stuck at them. Financial assets include bank balance, residency, income, inheritance property, real estate investment, stocks, inclusive all the things that come in one’s possession and he is the owner of that things. This information will help you to identify your financial health.

2. Tracking money allocation

Track your expenses, where you are spending? Track your daily spendings, track your special day spendings (i.e., Christmas, wedding, holiday) and track even your very small expenses (i.e., Tea, cigarette, drink), and analyze how much you’re are spending on unnecessary things. You should have clarity about needs and desires. Fulfil needs and skip desires. Once you educate yourself about these habits then it becomes easy for you to overcome.

3. Create monthly budget

This proves very helpful to you in managing your finance. As we discussed earlier, you can’t make a monthly budget plan by estimation only, you have to note down daily and weekly expenses also. If you are facing difficulty in writing down, there are very helpful software programs and apps like Quicken and Udhar /khata app. Never try to make such budget that is so strict in that you skip your lifestyle and makes you a miser. Such type of budgets badly effects your lifestyle and your miserliness shouts away everywhere. Create a workable monthly budget that suits you and your family. Solid budget is the pillar of good finance management.

4. Skip additional charges and taxes

Unsubscribe those services which you are not availing of but paying. These services include mobile application charges, net charges, newspaper charges, streaming services etc. Review these charges and their expenses, skip and cancel these subscriptions if these are additional and needless. You have to be sharp in submitting your monthly billings like electricity bill, gas bills, internet bill, etc. Analyze them whether you are paying them after due date. It helps you avoid late fees submission and prioritizes essential spending. On-time payment will help you in improving your credit score.

5. Managing Debt

It is vital to require management of debt. High interest debt can produce calamitous results. So, you should be conscious about managing debts. Create debt reduction strategy. Determine how much you have to pay? How much you can pay each month from your budget? To induce control on debt, a person can sell investments, negotiate with a lender to repay the debt in a payment plan, or file for bankruptcy.

6. Smart shopping:

Smart shopping means purchasing carefully and attentively. Check the price of item throughout the market whatever you want. Whether the brand you are purchasing in 30$ may be somewhere it is in 20$ in same quality. Avoid getting into big malls and prefer street shopping. Quality does matter while purchasing. A high-quality product demands extra money than low-quality product. Purchase high quality product that will run for long-term. If you are not familiar with street shopping. Then go to market with your friend or relative who has experience in street shopping and better knows the prices.

7. Build up savings

Now it’s time for accumulating all your savings. Allocate some of its parts as an emergency fund (in case of any unexpected happenings) and put it aside. It will help you in dealing with risky situations in which you are compelled to go into debt of high-interest rates and may be difficult to you to return it on time. You can build your savings, but it may take time probably months of months and years of years. Making bonds in which many individuals take part, fix an amount, and pay cash every month. This is the savings committee. One person is holding all other’s savings and at the end of the month, they write all members’ names on slips and choose on the slip with blind eyes. The individual who wins this lucky draw receives all member’s savings at once and easily acquires his needs and desires. After that, he continues to pay monthly-based cash as was fixed till the last member received his savings. Sometimes, members compromise with each other and agree upon not having any lucky-draw and continue paying according to everyone’s requirement and process continues respectively.

8. Invest on big purchases

After building savings it’s not a good deal to put all these savings in hidden corners. Let them grow and invest these savings into some big purchases. Purchase some commercial plots, invest in a business, some big projects, or invest in those things that are trending and whose price’s insurgence are high in the future. With the passage of time this investment will become an additional source of income for you. According to Warren Buffet;

“If your salary is your only source of income; then, you are one step away from poverty.”

By changing your habits, you can find a path to manage finances better. But if you stay committed to your habits and don’t try to transform yourself then all your money flews up away and you have nothing to have except a hand to mouth. Therefore, it’s mandatory for everyone to have knowledge and skills for managing their finances.

Solution:

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