4 Tips for Better Personal Financial Management

Don’t wait for next year to start paying attention to your finances – you should start managing them as soon as possible.

Personal financial management is not something that you can master overnight. It takes effective understanding on how to create a budget and stick to it, among other things. If you’re looking for the basic and most effective guidelines on financial management, here are your four top tips that can help you with your money matters:

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First Tip: Make sure you get paid based on what you’re worth, and then spend less than what you earn.

To discover your Point A on your money management journey, start off by making sure you know the industry standards on how much your job is really worth: you can do this by conducting an evaluation of your skills, productivity, job tasks, contribution to the company, and the going rate, both inside and outside the company. Being underpaid even a few hundred dollars a year can have a significant cumulative effect over the course of your working life.

This seems like a no-brainer, but the concept of professional worth tends to be set aside due to various reasons – lack of confidence, feeling of desperation, or even guilt. This may seem basic to any professional, but it is a critical element to make sure you can actually get what you deserve.

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Then again, no matter how much or how little you’re paid, you can never reach your financial goals if you spend more than you earn. Often, it’s easier to spend less than it is to earn more, and a little cost-cutting efforts in a number of areas can result in big savings. Start off small by choosing the cheaper options of what you usually buy. Keep in mind that it doesn’t always have to involve making big sacrifices just to create that balance.

Second Tip: Create a Budget Plan, and stick to it!

It doesn’t matter if you’re living paycheck to paycheck or earning six-figures a year, you need to know where your money is going if you want to have a handle on your finances. Unlike what most people believe, budgeting isn’t all about restricting what you spend money on and cutting out all the fun in your life. It is about understanding how much money you have and where it goes, then planning how to best allocate those funds.

The first step is to create a budget plan. What you do is to gather every financial statement you can, record all of your sources of income and create a list of monthly expenses. You also need to determine the fixed and variable expenses, total your monthly expenses, and finally make adjustments based on your needs and wants.

Now that you have a budget plan ready, make sure you’re going to stick to it. Of course, it’s not wrong to make adjustments when you’re just starting out, but be sure that you’re always on track with what’s really going on with your plan. Remember: numbers don’t lie.

Third Tip: Have a Savings Plan

You may have heard someone say, “Pay yourself first”. The chances that you’ll never have a healthy savings account are high if you prioritize paying off your other financial obligations before seeing what’s left over for saving.

Resolve to set aside a minimum of 5% to 10% of your salary for savings before you start paying your bills. Thanks to technology, there are many automated ways online for banks to save a certain part of your money to another savings account; use this to your advantage.

Fourth Tip: Maximize Your Employment Benefits

Employment benefits like flexible spending accounts, medical and dental insurance, etc., are worth more than their face value. Company benefits are part of the reason why employment rates are rising even in the midst of global financial problems. The sad part is that more often than not, these benefits are often unused by most employees.

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Make sure you know what your job offers. Maximize your benefits and take advantage of the ones that can save you money. Without you knowing, you can reduce your daily expenses and other costs of living, especially when emergency situations call for it, such as medical bills or dental check-ups.

How I Learned to Track My Personal Expenses

Not so long ago, one of the most challenging aspects of my day-to-day life was handling my finances. Anyone would agree when I say that everything that we do is all attached to how well, or not, we handle our finances. From my professional engagements to my personal agendas, how much money I have keeps popping up as a factor in my decisions.

After this realization, I just had to check how well I was doing with my “personal financial management.” Apparently, I needed some help.

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One of my closest friends, who happened to be a licensed financial planner and the Chief Financial Officer of his own company, decided to come to my rescue. I asked him how he keeps track of his finances. I thought he would throw me a one-liner answer like “Go to the bank” or “Just stop spending.” He gave me much more. He gave me insights that would turn out to be my guide which I could use for my journey towards better money management.

I have learned that everyone has his own story tell. The same is true with the way one handles their own money. Though there are 1,001 guides in money management out there on the internet, knowing my challenges and realizing the need to act upon my financial needs is always a good way to start.

That fact alone has helped me take on the challenge of taking my money matters head on.

True enough, his concepts – a path, if you will – which I still use up to this day, on how to make sure I have money when I need it have indeed cleared the way for my personal betterment. I have to admit, I still slip up from time to time. However, as long as I stick to the basic ideas he taught me, I know I can always catch myself in times of financial turmoil, and begin to steer toward the brighter side of things.

Let me share with you what I have learned:

Follow the map – Know your Point A

First, I realized that I need to follow a financial map of sorts. Just like any other map, there are three main components: Point A, Point B and the path from A to B. Simple enough.

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With regard to keeping track of my finances, my financial planner friend emphasized that it is important for me to know where I am coming from. I needed to dig deep to see where I am right now in terms of my finances – am I a positive, i.e. I still have money left every month after using most for my expenses and setting aside for my savings; or negative, i.e. l already run on fumes half way through the month and always end up dry by the end.

After learning that I vary from positive to negative erratically every month, we later on settled that I am, in fact, ending up as negative in my finances, as it happens more often.

All the information I got from knowing my Point A was critical as it determined my action plan. It also helped me choose what would be the most viable and rewarding Point B for me.

Call it a huge wrecking ball of a wakeup call.

From Point A to Point B

After shaking off the shock, I decided it was time to move forward and look for the light at the end of the tunnel. I had to raise the bar and start acting on the financial results I wanted for myself. True enough, he asked me “where do you want to go?” Starting from a negative monthly balance, I needed to decide what positive state I wanted to achieve before I took any action towards tracking my finances and achieving financial freedom.

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By this point, I felt as if I was talking to a professional bookkeeper from Xero Castle Hill – we were actually going somewhere as I started creating declarations of where I wanted to be. It absolutely did help me in my cause to know the amount that I wanted to be at by the end of every month and the amount I needed to spend in that same month. It was all about that numbers that would work for me.

It seemed basic at the time, but I later learned that we tend to be overwhelmed and lost when financial disasters strikes, making everything else seem more chaotic than usual.

Be open to the path

It is quite unfortunate to learn that people are used to just acting and doing things without even planning. And it is even more unfortunate when you learn that you are the one doing it! More often than not, this leads to a vicious cycle that tends to go round and round until something goes catastrophically wrong.

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I just consider myself lucky that I was led out of that mouse trap before any irreparable damage was done!

Now that I was made aware of how I was handling my money and what financial state I wanted to achieve, I learned what to do next. Though the actions I needed to do were based on what I specifically needed, these tips can serve as a general  guide to others whom I shared these basic concepts with:

  • Prepare for the what’s coming

I have learned that I need to be committed, honest and open with the fact that I have to deal with my finances. Sometimes, finding out the state in which my finances are in can cause me to want to go back to the hole of indifference that I had been hiding in previously. Being open to any feedback that I’m lucky enough to receive and reacting to it with positivity is the most important step in improving. Plus, it always helps to be prepared!

  • Keep track of your spending

Every expense should be noted down in order to serve as your “financial breadcrumbs.” It may be daunting at first – keeping receipts for groceries, noting how much gas you get every week, even the daily budget for my food. However, the benefits are well worth it. You get to have a record of where you could have gone overboard. In doing so, you’re able to create a database that could lead you to save more, be more, and achieve more. At the end of the day, that is what is most important.

  • Plan

Before you go into your “financial battle,” you need to lay down your course of action. I do this not for the world to see but for me to see my financial vision more clearly. Just like in the old saying “If you fail to plan, you plan to fail,” I want to make sure that what I do achieves the success I deserve since I have already planned out my next step. Also, any plan in tracking my finances aims to lead me to the right path every time – my ultimate goal of financial freedom is definitely a possibility.

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  • Execute

With my path already laid out in front of me, it is just a matter of sticking to the plan until I achieve my financial goal. Throughout my working years, I have experienced the challenges that often come along with any financial journey. However, with the passion, conviction and the drive to follow the goals I had set for myself, whether it is the stern budget, expense threshold or mindset to avoid using credit cards, I learned to strictly stick to it because that is the commitment that I have set for myself.