One of the hardest parts of growing up is learning to manage your own finances and making your money work for you. It becomes obvious, in your adult life, that money plays a significant role. It would help if you learned how to be both financially responsible and prudent. You must learn how to save and make sure that you are living within your means and not over or under them.
The question now becomes how can achieve financial freedom in a world where the economy continuously shifts; sometimes the economy shows promise of growth, and sometimes it takes an unexpected plummet, especially during a time like this with the COVID-19 pandemic. People have lost their jobs due to retrenchment and have ended up in difficult financial situations.
What does that tell you? That you need to be smart with your finances in order to stay prepared in case of any sudden changes. The following ways can help you manage and monitor your finances:
Having a savings account
A savings account is sometimes referred to as a ‘rainy day account’ because you want to have some money put aside for emergencies. A contingency fund goes a long way in preventing borrowing money from other people or places and being in debt.
Please make an effort to put some money into a savings account and do not touch it unless it happens to be for a dire situation. It teaches you discipline in terms of having money at your disposal but not rushing to the bank (or whatever firm you have saved in) whenever you need money in your hand. In the event you feel like you might forget to transfer your money, you can set it to automatically transfer a certain amount from your checking account to your savings account.
Avoiding unnecessary monthly bills
Sure, you have great credit and possibly qualify for certain loans at your bank, but that doesn’t mean that you should take out that loan. For example, say you are married and have a family, and both you and your partner drive separate cars, there is no need to take out a loan for a family car.
It is an unnecessary expense that you will need to count every month. In addition to that, it would be just another way to contribute to the pollution of the environment, as well as printing out tax forms each when you can now start filing taxes online to reduce your carbon footprint.
Taking out insurance policies
It is smart to take out insurance policies for medical cover, homes, and cars. They cover expenses you might not be able to pay for upfront. For example, medical cover and car insurance can cover the expenses incurred during a road accident. The car might be damaged and will need to get repairs done on it. The people in the vehicle might have sustained injuries, and that is where health insurance comes in.
House insurance usually covers theft and damages caused by natural causes such as fire or floods. Putting money into such an account also pays off in the long run.
Limit your credit card use
The number of times you turn to your credit card when you do not have cash in your pocket is ridiculous. There is the urge to swipe your card when you feel like you really need to purchase an item. The reality of the matter is you probably don’t need that item!
Human beings are seemingly covetous in nature; you’ll see something and feel the need to instantly want to own it, though you could do without it. Just like saving, using your credit card also requires you to be disciplined enough not to turn to it. If you want it, you don’t need it.
Keep track of your expenses
A habit that is important to cultivate is monitoring how you are spending your money. Think of yourself as your own personal auditor. You can use applications such as Microsoft Excel to make a spreadsheet showing how you have spent your money and work on updating it maybe twice a week.
That way, you can also learn how much you typically spend within a given amount of time and see what you can cut out.
As you track your expenses, you also learn to budget for your income or any other money you earn on the side. It is one thing to come up with a budget. It is a whole other thing to ensure that you are living by it such as paying for home insurance, bespoke car insurance & likewise. It is already clear that part of managing your expenses requires integrity and discipline; you need to be honest with yourself as you come up with your budget.
Proper financial planning
Learning to manage your money does not happen overnight. Be patient and learn from others, and do what works for you.