These days when our incomes are almost static it is important to find ways to manage your personal finances successfully.
It is not good enough to manage our finances on a day to day basis only but to focus on the future too.
Maybe it is time to start thinking of where you want to be in 10, 20, 30 years and start planning how to get there. Your finances cannot manage themselves.
It is our duty to find better ways to improve your situation and to plan where you want to be.
This is what differentiates the rich from the poor. The rich will always make sure that their worth is being put to good use.
This is why people like Bill Gates and others engage wealth management experts to manage their worth.
The rest of us on low incomes do not have to engage others to manage our finances as it may be a bit expensive but we can learn ways and means of managing the little that we have.
Most of the people that are rich started at the bottom but because they were focused they managed to get where they are now.
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Most of us need to learn to start investing in our little income.
Every time I think of investing, I am tempted to recite the story of how an investment of $1,000 in the Amazon IPO in 1997 is now worth at least a million dollars.
I, however, understand that companies such as Amazon are a special case.
But investing in shares fares much better than keeping your money in a savings account or worse spending it on luxuries you don’t need.
The good thing about investing is that your investment usually grows with the company.
It is, therefore, time you started investing in bonds, shares, etc every month if possible. If you are short of cash you can just invest as little as $50 every month.
Ways to manage your personal finances successfully
It is fine to seek advice on how to manage your finances but you are ultimately responsible for your own finances.
You are the boss of your own finances and now is the time to take charge so that you can make it financially now and in the future.
It is really sad to find retirees who are struggling just because during their productive years they never thought about the future and planned for it.
In the following paragraphs, I will try to present some tips on the best way to manage your finances. As a qualified Accountant, I know the futility of just living day by day without thinking about the future.
All successful companies aren’t just focused on today but more importantly the future. They are thinking of where they want to be in the future.
1. Review your financial position as a first step
The very first thing you do is a review of your present financial situation.
You can start thinking about the future until you understand where you stand financially right now.
In doing this you need to look at everything, assets, liabilities, income, expenses, etc.
Let me now explain all these terms.
Assets: By assets, I am talking about what you own. These will include house cars, savings, bank balance, etc.
Liabilities: Liabilities are what you owe to others. Examples included mortgages, loans, etc.
Income: In assessing income you need to take into account all incomes. Examples include salary, interest earned,
Expenses: These are self-explanatory and include, rent, food expenses, cable tv, phone expenses, internet
On the income and expenses, I would recommend that you focus on the previous month’s expenses only.
This is because most people are more used to think of expenses in a monthly cycle rather yearly cycle. It is, therefore, easier for most people to understand.
2. Set up your long term financial goals and how to achieve them?
The next step after analyzing your financial situation is to set some financial goals.
In doing this you need to not only think of the near future but also 5, 10, 20 years or more into the future.
Once you set your goals then you can find ways to reach those goals.
For example, if your goal is to be worth $2 million by the time you retire, then you will set out steps you need to take to reach that goal.
As pointed out earlier there are so many things you can do.
You can for example purchase bonds, shares, etc towards that goal.
In doing this you can estimate how much you need to start investing to reach that goal.
I would advise that you set realistic goals based on your income.
However, even if you fail to reach your goal it does not really matter if you try your best to reach them.
Doing nothing is what is worse than reaching your goals. In any case, you will have achieved something at the end of that period.
Even the best-run companies don’t always achieve what they set out to achieve.
3. Monitor your progress
Having financial goals and budgets is not enough if you cannot monitor them.
It is therefore super important that every month you sit down to take stock.
You need to know exactly where your money is going.
This can by taking account of all your income and expenses.
You can then match these expenses and income against your budget.
From this comparison, you can see areas where you need to do better.
Areas where you need to cut.
And where you can get bargains and therefore save.
The monitoring also needs to go beyond knowing your expenses and income.
Another thing you can do is to check your credit card expenses to avoid cases of mistakes and even fraud.
You can also review all your bills to make sure that they are correct.
It is easy to trust banks and other bodies but they too can make mistakes.
Another area that you can review is your tax notices and returns.
These are areas where you may be overpaying without noticing it.
When it comes to taxes aim to take advantage of all the allowances in your jurisdiction.
4. Take necessary actions based on your review of your progress
It is not enough to monitor and reviewing your progress if you cannot take any action.
Therefore once you do your review set out the actions you need to take to improve your situation.
If you are spending more than you need to you can find other ways to save your valuable cash.
You can do this by for example buying in bulk from wholesalers such as COSTCO.
Non-perishables like cooking oil, toothpaste, canned drinks, etc can easily be bought in bulk.
If you have more money you can consider taking advantage of offers such as paying for a year and having one month free offers.
Paying in advance can protect you against future emergencies such as losing a job.
If your investments are not performing well you can decide to cash in and invest somewhere else.
This is also an opportune time to review your credit card and bank account terms and conditions.
You can then compare them with other banks and credit companies deals. If there are better deals elsewhere then go for them.
No point in paying more than you should.
There are literally thousands of savings accounts and credit cards out there to choose from.