Modern society seems to be consumed by the concept of wealth. From magazine covers, TV shows to the lavish lifestyles of social media influencers, it is easy to lose track of your own personal finances. And sure, who wouldn’t want to go on monthly getaways, splurge on five-star hotels and designer apparel? However, reality hits when you realize that your personal finances often fall behind your imagination, and even though you’d much rather be drinking a cocktail on the beach, reviewing, planning and controlling your personal finances is a more practical way to get you there.
Here are a few tips on how to manage your personal finances:
Personal Finances: Creating a Budget
When it comes to spending, people often fail to see the bigger picture. We’ve all been there: lunch breaks, evening drinks, the irresistible urge to buy designer sneakers. Come next payday, however, and you’re left with very little money and even less of a clue about where that money went. Often finding yourself in a situation like this cannot be pleasant, and it shows an irresponsible attitude and lack of knowledge about personal finances and their management. Now, how does one go about it?
A base solution to control your personal finances is to create a budget and stick to it. Use spreadsheets of any kind, jot down all of your monthly expenses, be it an iced coffee before work or a two-bedroom apartment. What seems to be an exceptionally tedious process on the surface, can give you a realistic look at your personal finances, and save you from splurging.
A visual representation of your personal finances is a very efficient way to keeping track of your spending habits. All the unnecessary, repeated and pointless charges are sure to poke out.
Check your Credit Score
Overdue loans, unpaid debts and billing mistakes are all things that damage your credit score. Personal finance mastery cannot be complete without a thorough understanding of your credit score, as future investments, estate ownership and interest rates all depend on your score. If the alternative is missing out on these milestones, then a well-managed credit score is a must-have!
If you’re a beginner, use Credit Sesame to get a free look at your scores and begin improving them.
Take a hard look at your lifestyle
Picture this: you just got your salary, which is just enough to cover your credit card debt. Before paying it, you log into Instagram and see that your friend has bought a brand-new Porsche. Eager to keep an appearance up, you rush to the car dealership and buy yourself a newer model. Your friends sure are impressed, but was this the best use of your personal finances?
Well, no. Modern society is both consumer and debt-heavy, a concept in which the situation above does not stand alone. People fall into endless cycles of debt due to impulsive overspending, a pattern which can only be overcome when you break out of that mindset and start treating your finances responsibly.
Personal Finances: Cut A Few Things Out
In line with lifestyle changes, one can find that excess spending is often at the core of financial irresponsibility. A long, hard look at your personal finances can show that, perhaps, you could actually do without a new Rolex every month. There’s plenty of options to tackle excess spending (setting yourself an allowance, transferring a part of your paychecks to a savings account), but the most efficient tip of all is to detect things to be “cut out” of your personal finances. Whether you spend too much on gadgets, eating out or beauty treatments, there’s undoubtedly something you can find in your monthly personal finances worth eliminating for the longer run.
They’re Debit Cards, Not Magic Wands
Finally, your trusty debit card might not be so trusty after all. Sure, it is easy to purchase things with one small swipe, but did you know that paying in cash increases awareness of your personal finances? A study funded by the Consumer Financial Protection Bureau found that due to a direct, visual display of “money disappearing”, people are more likely to spend less while using cash.