Managing finances can be one of the most daunting tasks as an adult. The worst part of growing up and dealing with your finances is that you don’t get a briefing on how to go about it back when you were in the learning phase. The process requires identifying your current situation and then veering your decisions accordingly for a smoother and financially stable future. According to statistics, only 30% population of major countries have a long-term financial plan in check.
Now is the time to tackle these intimidating scenarios head-on. Down below is Houdini’s magical guide to personal finance.
Managing Personal Finances
1. Setting Goals (Short-term and Long-term)
The key to acing personal finance journeys is by setting goals. It is important to keep in mind that moving towards a financially secure future is gradual and ongoing. The tip is to create a list with all your goals. Ask yourself what you need to accomplish money-wise and jot it down in the list. This way, you will have a direction of where you need to go.
This is where a majority of people back out. But hold on, budgeting doesn’t have to be a scary topic. When you make an achievable budget, you are making way for your goals to be turned into reality. A very popular budgeting approach is the 50/30/20 framework.
According to this approach, you will be spending 50% of your earnings after tax on necessities, use 30% for expenses, and the remaining 20% for savings. Try out budgeting tools and apps for ease in allotting and calculating.
3. Eliminating Credit Debt
While it is true that credit cards are a fun accessory for all your shopping trips, there can soon turn into a disaster if not used consciously. With time, the interest rate applied on unpaid credit card debt rises to an astonishing amount.
Your goal on this personal financing journey is to get rid of this debt as soon as possible. A quick hack is to check whether you are eligible for a 0% interest rate debt shift to a new credit card. However, you do need to have a high credit score for this.
4. Saving for Retirement
It would help if you started thinking about your golden years far before when you expect to retire. If you start saving as soon as possible, the less money you’ll need to deposit to reach your retirement goal.
A quick hack for dealing with this daunting task is opening up dedicated accounts that offer tax breaks. There are also workplace or company offered retirement plans. These are also pretty effective.
5. Eliminating Unnecessary Expenses
This is another hard pill to swallow, yet a crucial one. Do you need a subscription to three different streaming sites for binge-watching and a couple more for music streaming? Not really. Prioritize what you prefer and let the others go. This way, you’ll be cutting out extra expenses. Around 58.1% of millennials have less than $10,000 in savings, don’t be one of them.
With practice, it is possible to learn the fundamentals of personal finance. It’s a never-ending training method, and there are many facets to the process. This article will explain the basics, from budgets to saving to investing if you’re just getting started.