Managing finances properly is one of the things that you have to prioritize. It’s not enough that you learn how to do it. You have to master it.
Why? Because financial success is not only about earning a lot of money. In fact, it’s more important that you learn to manage your money instead of looking for ways to earn more. You can earn the minimum wage and still be able to improve your financial situation. As long as you know how to manage what little you have, you can find ways to improve it.
But that’s not all. There are people who feel happier if they know their finances are organized. One survey done in 2019 revealed that 9 out of 10 respondents said they feel happy and confident if they have their finances in order.
Why do you think they feel this way?
Well, it all stems from the fact that we live in a consumerist society. That means if we want to survive or live a comfortable life, we need to have the means to spend on consumer goods. Without money, it would be hard to live a comfortable life.
But the thing is, we can have that comfortable life, not by having a huge amount of money. We just have to learn how to use it properly. Because managing finances mean we know what expenses we have to prioritize. It also means we know our limits.
4 beginner’s tips for managing finances
There are so many things that you have to learn if you want to be good at managing your personal finances. If you learn even the basics, it will help you maintain financial control no matter what you’re going through.
If you want to know how to get started, here are 4 important things that will make you good at managing finances.
Live below your means
This simple tip will save you a lot of headaches and heartaches. This is not the same as living within your means – which is limiting your spending based on how much you earn. So if you earn $10,000 a month, your expenses should only amount to $10,000. While this is good, it’s not enough.
You have to get used to living below your means. If you’re earning $10,000, you should keep your expenses to $7,000 only. Base your monthly budget on that amount. Nothing more. If you want to buy something that goes beyond your budget, find a way to save up for it. Either cut back on expenses or earn more through a temporary sideline.
Live a simple life even if you know that you can afford a more lavish one. As long as you and your family are comfortable, that’s okay. Unless it’s an emergency, don’t touch the extra $3,000 that you have.
What do you do with the extra money? You use it to strengthen your current financial position. You either save it or invest it. Use it to start multiple sources of income. That way you can set up a passive stream of income.
Always have sufficient emergency funds
Managing finances properly also means having sufficient emergency funds. There are so many reasons why you need to put a lot of importance on this fund. It’s one of the ways that you can secure your finances. If something happens, you don’t have to worry because you can use this to meet the financial needs of that unexpected situation. Even if you lose your job or you need to have someone rushed to the ER, you know you can afford it. Your emergency fund will help you focus on getting yourself out of that situation. You know that, even for a short period, you have what you need to survive. It’s easier to deal with the cause of the problem with one less thing to worry about.
Now how do you save up for an emergency fund? If you’re living below your means, this is easier to do. Prioritize your emergency fund because you’ll never know when you’ll need it in the future. And every time you have to use it, make sure you can replenish it.
Avoid collecting debt
Take note that this does not mean you should completely avoid debt. On the contrary, part of managing finances properly is learning to be a smart credit user. You have to learn how to use debt the right way. Debt can be very beneficial but only if you know how to use it.
First of all, you have to plan how you will use debt. All it takes is discipline and self-control. When you plan it, make sure it’s aligned with your budget plan. That way, you’ll how you pay for it. You can already set aside the money you need to pay the debt in full – or at least, the shortest time possible. And if you have the money to pay it, make sure you really use it to pay the debt. Don’t use it to buy something else that wasn’t part of the plan.
Remember, using debt is okay. But make sure you don’t collect it. Don’t let it accumulate.
Keep on learning about your finances
Finally, managing finances means you have to keep learning about it. As a start, it’s okay for you to learn the basic rules and habits you have to implement. But don’t stop there. You have to keep on learning new strategies so you can improve your financial situation. That’s the key to improving. You don’t stop finding out new ways to add to your net worth.
Read about the different ways you can set up a passive source of income. Or how you can maintain a good credit score. If you have debts to pay off, get to know the options that will give you the easiest way to achieve debt freedom. In case you need to borrow more, find out the different types of debt that you can use. Choose the one that has the lowest interest rate and affordable monthly payment.
Why you need to manage your finances properly
At this point, you have to realize just how important managing finances really is. It will really bring a lot of improvement in your life.
Of all the positive benefits, these are the top two that you will gain.
To ensure a high quality of life
When you know how to manage your finances, it means you have organized it. You know the current situation that you are in. This will help you make the right decisions about your finances. And do you know how that will affect your life?
It will allow you to make informed choices that will lead you to the type of life you want. It’ll give you what you need to pursue a high quality of life.
To have a secure financial position
You’ll also enjoy a more secure financial position if you are managing finances properly. knowing how to manage your finances means you have full control over your debts. It also means you can afford to pay for your needs. This will keep you from feeling stressed about your finances. Without feelings of anxiety, you’ll learn to enjoy your life more.You’ll be like the 29% of Americans who consider themselves financially healthy back when 2019 ended. While we don’t know their status after the pandemic and the recession started happening, we can be sure that they are in a better position because their finances were stronger compared to others.