5 Keys for Successful Personal Money Management
Personal money management can get tricky and challenging at times. You can make saving plans all day long only to find them fail after you’re tempted to get a new pair of shoes, or that branded smartwatch, or any other luxury item which is more of a want than a need.
Since the money you earn is not only yours but your family is also a stakeholder. So you need to be extra cautious while managing family finances.
There are some simple things that you can do to improve your personal finance management strategy. You’ll find this article helpful if you’re struggling to find an answer to the question: How to manage your finances?
Set Short-Term and Long-Term Financial Goals
You may want to retire early, invest in a property, or plan a long holiday trip. All these plans will depend on how well you manage your personal finance.
For example, if your goal is to retire early it will all depend on how much you’ve saved up. So if your personal money management is not effective, you won’t be able to save up to pursue this goal. When you define specific short-term and long-term goals, it sets the direction for you to manage your personal money better.
The next thing you need to do is to prioritize your financial goals. It will help to allocate your time to a specific goal according to its priority. This way you’ll not end up wasting your time on unimportant matters.
You can consider the below tips to better understand short-term and long-term personal financial management goals:
- You need to set up your long-term goals like, retire early, buy a house, or get out of debt
- Your short-term goal can be like, saving up enough money to have a family weekend including a fancy dinner and a movie
- Other short-term goals can include convictions like, not using your credit card, sticking to a budget, or spending less, etc.
Chalk Out a Detailed Personal Money Management Plan
A detailed personal money management plan is necessary to achieve your financial goals. Make sure that your plan is achievable and actionable. Break down this big personal money management plan into small milestones. For example, you can create a budget, a spending plan, and your strategy to get out of debt.
Once you’ve established these milestones and started working on them. You’ll see that within no time you’ll start having more money for pursuing your financial goals.
Do you want to buy a new house? Own or build a new business? Become a Millionaire?, Or plan for an exquisite holiday? All these plans can fall into place if you maintain discipline and define your clear priorities.
Remember for effective personal money management, you must keep eye on your long-term financial goals while you keep working on your short-term goals.
Your well-thought-out plans will help you restrict yourself from taking impulsive actions and making financial decisions based upon fear.
When creating a personal money management plan, consider the following things:
- Sticking to your budget will provide you the most control over your financial situation. It is the major key to success for personal money management
- Whatever the circumstance, keep pursuing your long-term goal, like saving for retirement, etc
- Creating an emergency fund will help you reduce mental stress
Make and Stick to a Budget
For successful personal money management, you need to plan a strict budget and stick to it. It allows you to monitor and control your spending habits, which enables you to save money to pursue your financial goals. For example, if you aspire to become a millionaire in 5 or 10 years then you need to think like one and learn to save like a millionaire.
Your budget can be as detailed as you want or a simple one. It will serve the purpose as long as you stay within its limits and spend less than what you earn.
Not just for weeks or month, plan you budget for years. By doing this you’ll be able to streamline areas on which spending will help you pursue your long-term financial goals as well. Some things may seem like a good purchase in the short term but don’t add any value in the achievement of your long-term financial goals. For example, you may find a good car that is a good value for money, but will it help you move ahead with your long-term financial goals? By posing questions like these to yourself you’ll keep on getting better at straightening out your priorities.
Now, these are some tips you can keep in mind while creating a budget:
- Make a list of your priority items, and think twice before spending for anything out of that list
- Try to use online budgeting apps, widely available on the internet
- You don’t want yourself to suffocate, so allocate a small amount to your entertainment fund and use it wisely
“Beware of little expenses; a small leak will sink a great ship.”
– Benjamin Franklin
Pay off your Debts
Debt is a major obstacle in the way of successful personal money management. You can not have enough money to go ahead with your financial goals until you are indebted. That is why it is necessary to clear out your debts. Easier said than done – If it was so easy, you probably would’ve done it already. Yes, it’s not easy that is why you need to come up with an effective plan.
For example, you can allocate more budget to one of your loans and keep paying the minimum payment for others. This way one of your loans will be paid off and then you can apply the same strategy to other loans. By doing this you’ll get rid of your debts earlier than anticipated to move further with your financial goals.
These are some tips to help you with clearing off the debts quickly:
- Sell rarely used items that you own and allocate an extra amount to your debt payment budget
- A second job can speed up the process if you have an option for that
- Look for spending that you can cut down to add an extra amount to your debt payment budge
Get Advice from Personal Money Management Experts:
Find people around you who are good with personal money management, and ask for their advice. Who knows you may get a valuable tip that may be a missing piece in the puzzle for you.
Moreover, If you have saved up enough money then you can ask a financial planner to help you investment management. A good advisor will clearly state all the risks involved in a particular investment and profit prospects. He will work out and find investment opportunities according to your suitability. A good investment can help you progress very quickly in terms of personal money management.
Following are some useful tips to consider when you’re seeking advice for personal money management:
- Look for a local church or community center that offers free or low-cost training on personal money management
- A preferable mentor will guide you through every step of the process and also help you formulate a budget plan
- If your parents or any other family member is good with personal money management, ask for their advice. State clearly your financial situation to them and look for the things which worked for them
“There are plenty of ways to get ahead. The first is so basic I’m almost embarrassed to say it: spend less than you earn.”
– Paul Clitheroe
Related Article: Money Management: Top 10 Financial Tips