Personal finance covers a broad range of topics from the act of making money to budgeting, and onward to saving and debt reduction. Money is an interesting topic because it’s something we all come in contact with on a daily basis; it’s often both the solution and cause of our problems.
Those who understand how to make money work for themselves are the types of individuals that can enjoy the finer things in life and relieve the stress brought about by financial instability; those on the flip side may feel they’re in a bottomless pit. But whichever side of the coin you’re on, the tactics to personal finance are the same.
If you follow the ABCs you’ll do well with your money whether it’s increasing your worth, being comfortable, or digging yourself out of debt.
The first step to financial stability it to understand how you spend your money and why you have certain spending habits. Through the understanding of these two elements you will have the chance to take accountability for your actions, which will reveal what truly needs to be done.
Juan Carlos Bertini, a financial expert, has this to say about financial blunders and accountability:
“Before anyone can afford to move on to creating a better financial future, they must first deal with the mistakes that they have made in their financial pasts. This involves stopping financial leakages and correcting financial blunders … These mistakes can range from bad investments, credit abuse, taking out loans at higher than appropriate interest rates, purchasing property that one cannot reasonably afford, and taking out too many or the wrong insurance policies.”
If you want to be accountable you must take the following actions:
1. Identify your true take-home income (after taxes)
2. Identify the living expenses and if there are ways to reduce the costs
3. Identify where the remainder of your money goes once you’ve paid bills
Once you have an idea of where your money comes from and where it’s going you can figure out what culprit is causing financial instability; more often than not it comes from living beyond your means which you’ll need to account for if you want to move forward.
Part two of gaining control over your personal finance is through budgeting.
At this point, you will have discovered your flow of income and expenses. Ideally, you’ll also understand where you’re leaking money from.
Developing a budget requires you to have a plan.
Without a plan, you are simply cutting back on your lifestyle and setting money into savings without a real purpose; without this purpose, you’re likely to revert back to old habits – there needs to be some kind of goal or positive outcome you can envision if you want to build great habits in budgeting.
Take these actions when building your budget plan:
1. Create a difficult but attainable financial goal (vacation, removing debt, savings)
2. Determine how much of your pay (after bills) can go toward the goal
3. Set aside a small amount of “guilt-free” money
4. Start working on the goal, right now
You will need to make adjustments to the budget since there are some variable expenses. Perhaps you could go one step further and automate the bill paying and saving process by using automatic checking and billing services – this way you don’t have to touch the money and feel the impulse to spend.
Finally, it’s about the commitment.
As mentioned – cutting back on your lifestyle and within your budget forces you to make a sacrifice in many things you may have once enjoyed:
· Regular nights out on the town
· Higher-end items
· Frequent vacations and trips
· Expensive gadgets and toys
Just thinking about those items can cause you to squirm in your seat if you haven’t indulged for some time, but you must remember why you set your financial plan in motion … for the bigger wins.
If you’re having trouble or feel you’re slipping in finances than take these actions:
· Use an accountability buddy before you make major purchases to dissuade bad spending
· Wait a month before you decide to buy an item, which at the later time you may not want
· Keep visual reinforcements around you at all times to keep you focused
· Don’t beat yourself up over small slips – adjust and keep committing
· Use apps or some form of tracking to see how much you’ve accomplished, daily
· Reward yourself when you reach milestones
Is there a single best way to stick to a budget? That depends on how willing you are to the commitment.
There are many others out there like you that want to grow, find stability, or climb out of debt. Personal finance is something we pick up along the way yet refrain from including in discussion with others – destroy this barrier, let everyone know your plans, and commit.