I started developing interest in managing my money when I first started working. Suddenly, I found myself having a steady pay check but unequipped to manage. It look me a lot of reading books and asking around from people who were senior and been around to understand how to go about it.
Do you also find the prospect of managing finance giving you cold feet?
At the very basic level, personal financial planning include things like budgeting, retirement planning, saving, insurance, and getting out of debt. You don’t have to be a financial planning expert to have a firm grasp on what each of these concepts means and how they impact you.
Let’s decode the basics to gain a deeper understanding of how they work together to lay a solid financial foundation for you and your family.
The very basics of personal finance is budget. At its simplest, a budget lists how much income you have coming in compared to what’s going out each month.
Having a detailed and written budget allows you to make smarter decisions with your finances daily.
The simplest way to create a budget is on paper, but you can also use a budgeting spreadsheet, software, or budgeting app to get the job done.
Try testing out different approaches each month to find the one that best fits your needs and style.
2. Cutting Expenses
After you’ve successfully created a basic budget, you will have a much better understanding of where your money goes and how you can trim expenses.
For example, some of the variable expenses you may consider eliminating include unnecessary subscription services like cable or recurring memberships like gym which you may not use or dining out daily.
Why is reducing expenses important you ask?
Because you will have more money in your budget, so you will be less inclined to rely on credit cards or loans to cover spending.
3. Getting Out of Debt
Even after creating a sound budget and cutting unnecessary expenses, you may still find yourself with lingering debt.
Using credit and taking on some debt itself isn’t necessarily a bad thing, but when you can’t keep up with the payments, you can be in trouble.
Getting out of debt becomes even more difficult when you’re facing a high-interest rate on credit cards or loans.
One of the most important steps in getting out of debt is to pay more than the minimum amount due each month.
4. Saving for Retirement
Retirement savings needs to become a priority instead of an afterthought.
If you’re not saving for retirement yet, revisit your budget to see if you have room to include it.
So you have created a budget, cut expenses, eliminated your credit card debt and have started saving for retirement, you are done, right? While you’ve come a long way, there is one more important aspect of your finances that you need to consider. ie. insurance.
You have worked hard to build a solid financial base for you and your family, and it needs to be protected. Accidents and disasters can and do happen anytime and anywhere, and if you aren’t adequately insured, it could leave you in financial ruin. You need insurance to protect yourself. Life insurance, disability insurance, and homeowners’ insurance can help with those scenarios.
It is very important for a person especially a woman; to be able to handle their personal finances on their own. With careful study, planning and after taking adequate steps; a person can be financially independent and enjoy their life to the fullest.
Which of the above mentioned steps have to taken to make yourself financially secure ?