We all have had our ups and downs with life making us aware that it is unpredictable, to the extent that is beyond our comprehension. A pandemic-like situation can ruin long-term plans, devastate families & disrupt businesses beyond repair, and for those who lost their job, things will never be the same again. In such turbulent times, to be prepared, we must all ensure that we keep ourselves both physiologically and financially healthy.
Apart from health, financial security is a great satisfaction that you can accord to yourself and those you love, suggests Apnapaisa.
Take a look at 9 tips that you can follow to manage your money better:
Prepare a budget
The budgeting process may look monotonous as you will have to list all expenses, add numbers, and ensure everything is in order. It may also look difficult for people who are scared of money management and math. But you only need to shell out a few hours to track your monthly income and expenses. Besides, the value of budgeting surpasses the time taken to create a budget. Also, update all monthly spending to plan for any other expenses. It does not make sense if you have tucked away your budget in the file cabinet or have not opened the Excel file in your device. Referring to it regularly helps you plan your expenses better since you will get an idea of how much money you have saved and spent on a monthly basis.
Restrict your unbudgeted spending
One of the essential aspects of your financial planning is the net income or the amount of money left after you deduct your expenses from your income. Using a certain amount for fun and entertainment and other miscellaneous expenditures is advised. Ensure you are going smoothly here, as you must plan for the entire month. If you are planning any big purchases, make sure it won’t interfere with any other planned expenses.
Note down your spending
While small purchases here and there may look tempting, it will take little time to realize that you have overspent your budget. It would help if you started tracking your expenses to learn where you are unknowingly overspending. Categorize your payments in a spending journal to identify areas where you must keep your costs in check.
Avoid subscriptions to recurring monthly bills
Your income and credit may qualify you for a specific credit limit, but that does not mean you should opt for it. Your bank is only aware of your income and debt obligations but cannot calculate any commitment that stops you from making timely payments. So the onus is on you to allocate funds every month based on your income and other monthly obligations.
Buy at the best prices
When buying a product or service, it is prudent to look for discounts, coupons or cheaper alternatives. After all, saving money should be the end goal of price comparison shopping if partaken in.
Save up for major purchases
When planning your finances better, one habit that will take you a long way is the ability to delay gratification. In the era of instant gratifications, putting off large purchases gives you more time to analyze whether the purchase is necessary. You will also get more time to compare prices in the market. Additionally, instead of using your credit card, you save on the interest charged for swiping the credit card. Another advantage of saving money, in this case, is that you can spend that money on essential purchases. You also avoid making EMI payments.
Restrict your credit card purchases
Owning a credit card is not a great idea for bad or compulsive spenders. Again, swiping your credit card is easy when you do not have ready cash. But have you thought about how you will pay off the balance? Limit the usage of your credit cards for purchases you cannot afford, especially on items you really do not need.
It is advised to deposit money into your savings accounts every month. Doing so helps you build healthy financial habits. You can even set up an automatic transfer from your checking account to your savings account every month. That way, you do not need to transfer money into other accounts proactively.
Cultivate good money habits
Planning financial allocation in advance and postponing purchases may take a lot of work initially. But the more you make these habits part of your life, the easier it becomes to manage your money and plan your financial goals better.
Why do I need to plan my finances?
Without planning, achieving your financial goals may look like a puzzle. Unfortunately, this may result in overspending and living from paycheck to paycheck. Planning your finances helps you get a better grip on your income and expenses so that you can improve your financial status.
How do I plan my finances better?
The first step should be to assess your money habits and make sensible changes in your life. For instance, you may start by making one if you still need a budget. If you already have one, diligently track your expenses and how it aligns with your budget. Once you know your income and expenses, you may increase your savings, invest more or pay off your debts accordingly.
Life becomes easy with good financial skills. When you plan your finances better, you are able to improve your credit score and reduce debt. Follow the above tips if you wish to improve your financial planning skills. Follow ApnaPaisa if you wish to manage your finances effectively,