With the hustle and bustle of work and home life, it’s easy to push aside certain responsibilities. More often than not, people choose to avoid dealing with finances, consciously avoiding the big black hole that is financial planning – I’m guilty of the same. Ultimately, my constant state of “being broke” in college forced me to learn how to get on top of my finances. I found, that with a little advanced planning and the implementation of saving methods, personal finance management does not have to evoke a deep sense of dread within you. Rather, you’ll be pleasantly surprised with the extra cash you might accumulate by carrying out these basic practices:
Budgeting, budgeting – it’s what everyone tells you to do, but rarely ever gets done. Unfortunately, keeping a budget is key to having your finances in order. Budgeting helps you know how much money you afford to spend, in terms of fixed internals (months. years etc.) It’s important to create a budget based on your cash flow, so that you aren’t running short during periods of spending. A good way to start is to monitor your current spending, and then create a budget accordingly. Budgeting apps like Mint are extremely helpful when it comes to being able to access your budget anytime. I personally am a big fan of Mint, to a point where I obsessively check it every day. Its interface is intuitive, and I love the little alerts it sends you in case you exceed your allotted budget.
It’s always good to have a goal in terms of money. This could be a short term goal, for instance, buying a new dress, or a long term goal, like saving up for a much needed holiday. My current goal is to save enough to be able to go on a scuba diving trip in 2016, and so I make sure to set a little bit of my every paycheck aside, solely towards meeting this goal. At first it was hard, mostly because I would rather spend that money on something immediate for a sense of instant gratification. But after a couple months of doing this, it became a force of habit, and my scuba diving fund is slowly but steadily growing. Having a goal will motivate you to stick to your budget, and go the extra mile it takes to save money.
There are many different ways to save money. Opening a savings account is a great long term investment. Make sure you allocate a certain amount of your paycheck (maybe 5-10%, depending on what you can afford) towards your saving account. Without fail, this amount should always be deposited into your savings account prior to spending on other things. Your savings can be invested so that you are essentially “earning money on your money”. If you aren’t well versed with the intricacies of investing, be sure to seek out a financial advisor’s help before moving forward. Savings are handy when it comes to meeting your goals, or even in case of emergency.
Think Long Term
While a savings account is relatively constant, there are other ways to save money in your daily life. One of these ways is to sign up for various newsletters, online coupons and daily deals. Be sure to create a new email account to do this though, so that your personal email does not get clogged with spammy offers. Keep an eye out for deals on products that you are interested in. Getting samples at various stores is another way of saving. Samples can be used in gift baskets, thereby cutting gift expenditures. Samples are also a good way of trying out a product without spending on it and then realizing you hate it. Unplugging electronic devices when you leave the house, or don’t need them, will help reduce your electricity bill. These seemingly small practices will ultimately add up, and contribute to your overall savings.
Long term planning consists of many aspects. The basics involve having a savings account (described above), a retirement fund/plan to tide you over when you aren’t able to work, considering what to do if your spouse passes on, and thinking of a way to distribute your assets once you are gone. I remember when my dad talked to me about his will – it was uncomfortable to say the least. These can be morbid conversations, and so, a lot of people avoid thinking about the long term. Still, it is imperative to plan for unforeseen circumstances like the passing of your spouse, so that you aren’t left stranded and lost, at a time when finances and legal complexities are the last thing you want to deal with. Making sure you have an estate plan, commonly consisting of a will, power of attorney and health care proxy will provide you and your family with peace of mind. Long term planning can be tedious and take up a sufficient amount of time, but it does let you reap continuous benefits.
These general practices are a great way to kick start your financial planning. It may take some getting used to, but trust me; soon you’ll be on top of your finances like a boss!
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