Personal finance is something everyone ought to get acquitted with. Many would have become wrecked due to bad financial management. Life may give you one opportunity to make large sums but if not well managed, such a person may end up poorer than he started. What’s important is not how much you make but how well do you manage what you make.
In my experience, I have seen a few number of things that affect people’s finance or let me say why people lose their money. Interestingly, these are things people overlook. I shared one of these things with someone and he objected that it’s quite insignificant for such to affect anyone. I had to tell him how much I saved the moment I practiced it. Here are the few things to check;
Keep a financial record
That sound simple and many may feel it can not add anything to your purse. In 2013, I practiced this. I tracked all my gift, expenses and income. Even things that were given to me, I quantify it with the price. At the end of first month, I discovered what I was spending so much on that was of little importance. With this knowledge I was able to save 15% of my expenses the following month.
Create a Budget
Too many people live without budget and that’s not too good. You don’t need any technical knowledge to do that. Start with a two line budget for income and expenditure. Write out what your income for a month will be and what you want to do with money (expenditure). Your expenditure should not be more than your income. If that happens you a deficit budget but if its the other way round, its a surplus budget. The goal here is to prevent deficit budget. Your surplus budget should be directed into your savings.
Borrow/rent when you can.
You may not necessarily have to buy everything you need. If its once in a thing and the cost of buying it is high, you may simply borrow or rent it for the time you need it. That should save you some money.
Spend what you have, not what you hope to make.
While buying things, be wise. Don’t buy things on credit expecting someone to pay you. What if he fails, it means you simply walk into debt. Only spend money you have in your account/hands not the work you hope to do someday or payment someone will do sometimes later. Be careful, its not easy to come out debt sometimes.
Debt is what you owe someone with a promise to pay later. It is believed that debt is bad but that’s not 100% true. There are good debts and bad debts. For your debts to be good or bad depends on you. To achieve a good debt, you need to take calculated risk. That is, don’t borrow to do something that’s not a capital project. Such project should be able to bring back such debt. And apart from the project’s return over investment, you should have another source to pay for the debt.
These few advice are not all you need for a well-managed personal finance but its a good starting point for anyone and a quick reminder for experts.