Personal finance management isn’t just about managing your money; it’s about protecting yourself and your family from debt and financial hardship in the future by creating long-term solutions to short-term problems. We all should learn how to manage our personal finance and grow our finances to achieve financial independence. And financial independence comes when you learn and have enough knowledge to manage your personal finances. To keep yourself on the right track, learn how to manage your personal finances in the best way possible with these eight tips to better manage your personal finances.
1) Track your expenses
This can help you stay on top of your spending and debt, which will keep your finances in check. Many people find it helpful to use a budgeting tool like Mint or Personal Capital, but you can also manage your finances using a spreadsheet.
The important thing is that you track where all of your money is going. Keeping an eye on these numbers will help make sure you don’t overspend and get into trouble with debt. If all of your numbers are dropping, it’s time to figure out what changes you need to make so that they start going up again.
If you have debt, it’s time to figure out a plan for getting rid of it. You can get started by tracking your expenses and finding areas where you can cut back on spending. One way to do that is by using free online tools like Mint or Personal Capital, which help you keep track of all of your accounts in one place.
Once you know where your money is going, work on ways to reduce costs so that you can dedicate more cash towards paying off debt or investing for your future. And don’t forget about budgeting! Once you see how much money is coming in and going out each month, it should be easier for you to make sure everything gets paid on time.
2) Negotiate bills
Debt is an inevitability in today’s world. According to NerdWallet, 90% of people have some kind of debt and only a quarter of Americans are able to pay off their credit card balances in full each month. If you’re looking for ways to better manage your personal finances, it might be time to start renegotiating bills.
Start by calling creditors and asking for a reduced interest rate or a break on late fees. You can also negotiate with utility companies, landlords, car dealerships—just about anyone who charges you money.
If you’re denied, keep asking. It might take a few phone calls, but eventually you’ll get through to someone who can offer you better terms. If you can’t get anywhere on your own, consider contacting a credit counseling agency. These non-profit organisations help negotiate debt with creditors and often charge a percentage of whatever they are able to save you as payment for their services.
While not every situation is appropriate for credit counseling, if you’re finding it difficult to make ends meet because of high interest rates or late fees it might be worth considering.
3) Look at alternative investments
If you have money that you’re looking to put away for growth, but you don’t feel comfortable with putting it into plain old savings accounts, consider alternative investments. Alternative investments typically entail a greater degree of risk than standard stocks and bonds, but can also yield higher returns.
Investments that are considered alternative are mostly geared toward wealthy individuals, as they often require a high net worth in order to invest in them. However, if your investment portfolio is small and you want to grow it faster than conventional investments will allow for, then alternative investments may be worth looking into—depending on your personal financial situation.
Some of these investments include equity crowdfunding and peer-to-peer lending. Peer-to-peer lending is particularly appealing, as it combines elements of both traditional personal finance management and alternative investment strategies. Instead of loaning money directly to businesses or other individuals, you can use a peer-to-peer platform that connects borrowers with investors looking for high interest rates.
As an investor, you can choose how much risk you want to take on by choosing whether you want your money loaned out as personal loans or used for more speculative ventures. Returns from these types of investments tend to be relatively low compared with stocks or bonds, but they also carry much less risk than most stocks—especially if you just stick with loans for students and consumers.
4) Get rid of debt
Having a significant amount of debt can be detrimental to your personal finances, especially if you’re stuck in an interest-accruing trap. Getting rid of debt is one of the best moves you can make when it comes to managing your money; not only will it save you hundreds or thousands on interest payments, but it’ll also help you stop thinking about your money—and how much is going out versus coming in—all day long.
Having no debt, or even less debt than you have now, means that every dollar earned is pure profit and can go toward building wealth. Once all high-interest debts are paid off and credit cards aren’t being used every month (if at all), that’s when things start getting really fun.
Find out how much you owe across all credit cards, student loans, and mortgages—and add them up. Then find out how much interest you’re paying in order to get that total debt figure. By subtracting your total debt from your annual income, you’ll know exactly how much money is going toward interest payments every year.
And if it’s anything more than 10 percent of your gross income, then you have some work ahead of you!
5) Increase income
The most obvious way to improve your bottom line is by increasing your income. In an ideal world, that’s exactly what you’ll be doing—working hard at your job or business and earning more each year. But if that’s not a reality for you (or you want to go beyond part-time hours), here are some other ideas.
Another option, if you can pull it off, is to use your skills and knowledge for freelance work on evenings and weekends. Working from home gives you greater flexibility, which will help you save on transportation and overhead costs (like office space).
If that’s an option for you, use these tips to land a better-paying gig. You could also try launching your own side hustle—even if it’s only a few hours of work per week at first—as a way to get some extra income quickly.
6) Build an emergency fund
The first and most important step toward financial security is building an emergency fund, which is enough money set aside to cover your expenses for at least six months. If you’re saving up for a home or a car, put that money in your account; don’t use it as part of your emergency fund. It should be cash only—that way you can actually spend it if need be.
The best place to save is in a money market or online savings account with a bank that’s FDIC-insured. These institutions are required by law to keep your money safe from financial institutions. Since you don’t need access to it regularly, you can make your life easier by using an app like Qapital or Digit, which will withdraw small amounts of money each month for you and put it into your emergency fund.
7) Find sources of passive income
Passive income is vital to ensuring your future financial health. One of the best places to start when looking for passive income opportunities is with your day job—if you’re employed full-time, there’s a good chance you can earn money on top of your 9-to-5 income through side gigs, seasonal work and other sources of passive income.
You may even be able to take on some side work without replacing your main income—for example, coaching others as a fitness instructor. Freelancing isn’t always practical in your line of work, but if you have technical expertise or specialized skills, there are plenty of opportunities out there for freelancers.
Look into a freelance writer and editor positions that can help you build a portfolio of writing samples and potentially gain exposure in your field. Once you land a few gigs, it’s time to start working on building your own site so you can start taking advantage of larger projects with higher rates of pay.
8) Keep track of your finances.
If you’re managing your own finances, it helps to keep a record of your transactions. Use an app like Mint or other financial management software so you can keep track of where your money is going and where it came from. This will help you set goals for where you want to be financially in six months, a year or five years from now. A solid savings plan helps prevent money-related stress later on and opens up opportunities for investment and growth!
It also makes your life easier in general because you’ll know where you are at all times when it comes to money. Whether that means writing down how much money is coming in each month or using a digital tool, tracking your financial transactions helps you prepare for how much money you need. Without that preparation, it’s easy to make poor choices and go into debt.
Money isn’t everything, but it certainly is an essential component of many aspects of life. And while most people believe they know how to manage their finances well, many also admit they could do better. Whether you’re trying to put together a solid investment plan or just trying to get your spending in line, follow these eight tips for better managing your personal finances.
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