Fundamental Steps for Effective Money Management
When you are limited in your budget, it might be a good excuse for you not to save anything for a rainy day. But, if in your monthly earnings you are just managing to pay off your bills, you, undoubtedly, are in serious need to keep a financial buffer. Easier said than done, money management is, certainly, not easy to begin with, but, once you get a hang of it; it becomes a habit.
If you happen to be in a debt, it is high time that you start knowing your money, get organized and manage it effectively to squeeze yourself out of all kinds of unsafe financial situations. Read on for efficacious money management tips encouraging you to set up a budget, stick to it and start saving.
- Setting up a Budget
This is the first step in your endeavor to control your finances. You might think that planning a budget is not essential but read on the following benefits of setting up a budget, which might force you to change your mind:
- A budget makes you less likely to fall into debt.
- Unexpected costs won’t come across.
- When you will stick to your budget you will improve your credit rating.
- A good credit rating will make you a better candidate to get loans or other financial help when you will be in need. You will easily get best loan offers for you at lower interest rates on popular search engines for online business and personal loans like MoneyLend.net.
- You will be able to assess better the areas from where you can save money.
- Last, but not the least, you can save easily for your dream car or a dream holiday.
Setting up a budget is not a tedious task once you have identified how much you are actually spending on household bills, travel, leisure and other living costs. Maintain a spreadsheet or download a budgeting application on your smartphone to better manage your budget.
Once you have set up your budget, stick to it, but, it is not a hard and fast rule that you should stick to it every time. Time does change and you must review your budget periodically to add any additions or modifications if required.
- Finishing off Loans & Credit Card Dues
The next fundamental step in effective money management is to pay off your loans and credit card dues. Credit cards are a good source of financing yourself when you are in a dire need, however, if you happen to go overboard with them, you won’t even realize when you have fallen in a vicious debt trap. Try to pay more than the minimum amount on your credit cards every month as paying only the minimum amount doesn’t reduce the debt as fast it should reduce. Moreover, credit cards charge the highest rate of interest and if you continue to pay only the minimum amount each month it will take years for you to pay the entire due provided you don’t spend again what you are paying back.
As far as personal loans are concerned, they do offer a pre-closure settlement option. However, if you don’t have that many finances to pre-close any existing personal loans make sure that you continue paying the monthly installments without fail. Paying off your monthly installments on time will help you gain a better credit rating. More importantly, it will help you gain the much-needed peace of mind.
- Maintain some Emergency Savings
Try to have a saving’s goal each month and maintain a separate bank account for them so that you don’t happen to spend what you are saving. If you can’t set up a monthly goal try to put as much as you can each month into a separate savings account. This way there will be much-needed flexibility and no pressure will be on you that you have to save a particular amount each month. Moreover, the knowledge that you are saving will, undoubtedly, bolster your financial spirit.
- Invest a Part of your Savings
When you start to save, gradually you will find that your savings are growing. Upon garnering a substantial amount as savings think of an investment plan. You can take up a part of your savings and invest the same in your pension plan. If you are thinking that you are young now and there is a long time for you to retire so you shouldn’t invest in a pension plan you must reconsider your thoughts. A pension plan is of an utmost necessity nowadays to help you get the much needed financial stability and a fixed monthly income when you retire to spend your old age with head held high. The earlier and the more you invest in a pension plan more likely you are to spend your old age comfortably.
Also, you can consider opting for a Systematic Investment Plan (SIP) to save money for your big goals like buying a car or a house.
- Anticipate Major Costs & Spend on What Matters the Most
The best budgeting strategy is in which you look ahead a few months or even a few years. If you know there is a wedding coming in the family in one or two years you must start saving and also consider taking a personal loan from the bank for wedding expenditures, for which, thereafter, you will require paying a monthly installment. Anticipating early on the major costs which might be coming your way is a great way to manage your expenses. It gives you the motivation to spend only on what matters the most and allocate the remaining amount to savings.
Managing money is, undoubtedly, not a simple task, but, since life is highly unpredictable and can surprise us any time with financial setbacks, money management is an essential art which everybody must strive to learn and implement, in order to be ready for any kind of financial situations.