Ways to manage your finances
AFTER THE long Christmas holidays many of us might have exhausted our budgets one way or another, whether through buying gifts or providing cash for others, or home improvement, or even pampering oneself, most of us encounter additional spending throughout the Christmas and New Year holidays.
As a result, it is important to understand how to manage our finances in order to restore our financial position. Once again, here are ten useful tips to help you manage your finances properly for this new year.
Track your monthly spending
Many people have no idea how much money they spend on food, bills, clothing, entertainment, etc, per month.
In order to have a healthy financial position, it is important to first make record of how much you spend on a monthly basis, this will provide an idea of your household or businesses cost structure.
Develop a budget and stick to it as closely as possible
After recording your average monthly expenditure, develop a realistic budget based on your important expenses and track to see that you are sticking to your budget closely. Only making allowances for very important unforeseen events, record these unforeseen events (hospital emergency visits, lawsuits, etc) to see how they impact your budget throughout the year.
Develop a marginal propensity to save
Your marginal propensity to save is the portion of your income that you save on a monthly basis. For example, if you receive $100,000 per month and you budget to spend $80,000 and save $20,000, your marginal propensity to save is 20 per cent. Try to improve on this margin if your budgeted expenditure allows you to do so as time progresses. Your savings are very important; it provides the cushion of cash for rainy days or in the event that you lose your job or someone in your family becomes very ill; always budget for savings.
Avoid late fees and charges
Most companies charge late fees when bills are not paid on time. It is important to avoid these late charges by paying bills on time.
Record your monthly bills and due dates and keep reminders on your phone or elsewhere to make sure you pay bills on time. Late fees encountered every month for the year can add up and prove to be very costly unknowingly.
Analyse your debt and credit position
Always analyse and keep check of how much you owe and budget debt repayment in your monthly plans. Remember, if you borrow money from someone, it is not yours.
Budget to repay this and try not to borrow from one person to pay another, especially if you are paying large interest on these debts. You will end up paying much more for the same debt over a longer period of time.
Monitor credit card debt
Credit cards can be very useful, especially for shopping online and engaging in cashless spending for security reasons. People increase debt very easy via credit cards. It is important to keep track of your credit card spending and monitor your repayments on a monthly basis. Credit cards are some of the most expensive debts as they charge interest rates per day plus a fee for late payment, try as best as possible to service your credit card bill on a monthly basis to avoid interest rates and late fees.
Take advantage of free money
Some employers offer contribution to match your savings for retirement. if you work for one of these institutions, be sure to pay the maximum amount so that you can receive the maximum contribution from your employers. Also be sure to use any coupons, stubs, etc, that you receive. This will help to minimise your total expenditure on a monthly basis.
Analyse your insurance policy
Life and health insurance policies may take up a portion of your monthly expenditures for which you might not have the appropriate coverage. Be sure to analyse your insurance policy to reduce payments to a minimum while getting maximum coverage over time.
Seek financial advice
With sound financial advice people and their businesses can improve their financial position and become gradually selfsustainable and profitable. Never be afraid to get professional financial advice and do consulting, It will be worth it in the long run.
Make rational spending decisions
Finally, always make sure your choice to spend is rational. A rational choice weigh up the cost and benefit associated with a particular spending. If the benefit associated with a particular spending is greater than the cost, then and only then the spending is rational.
Your savings are very important, it provides the cushion of cash for rainy days or in the event that you lose your job or someone in your family becomes very ill; always budget for savings.