Financial management strategies you should adopt
Adopting these strategies will help better manage your finances
A growing number of young adults are beginning to take the issue of financial planning very seriously and it’s quite important for them to properly strategize towards their financial goals. The following are proven strategies that will help you in achieving your financial goals, if well adopted and implemented.
Have a budget
This is the most important step and the very first one. Have a list of your income, that is, how much is coming in, for example, salary; and also do a list of your expenses, such as rent, phone bill, loan, insurance premiums, and so on. Don’t forget to include an amount you save monthly and an amount you put in your retirement account.
Deduct all your expenses from your after-tax income. If there is noting left or your expenses is more than your income, then, you have to start reducing some of your spendings.
You can do this by going through your expenses one after the other. Take out some items on the list you can do without, for instance, a subscription you don’t necessarily need. Then, rein in your impulse buys. Before making a purchase, ask yourself if you really need it, how you will pay for it and if it can wait. Finally, try using cash only, or a debit card, for a month to cut down on credit card bills.
Settle your debt
The next is to settle whatever debt you have. Borrowing isn’t necessarily bad but not paying back on time is what is bad. As long as you pay your bills on time, you’ll be building a positive credit history.
However, too much debt can be detrimental to your financial success. That means you need to come up with a strategy to start paying it down.
One way to start addressing this is to rank your debt from the highest to lowest interest rates and start paying them off in that order. Cut down on your credit card use and try to negotiate a lower interest rate with your current credit card company.
Also, always keep track of your due dates so you don’t rack up late fees and try to pay more than the minimum amount due.
The most significant aspect of financial planning strategies is to save, it’s important because is the bedrock of investment. This requires being persistent in ensuring that a certain percentage of every income is saved. For instance, you can decide to save 30% or more of your salary or income.
There are various ways that consistent savings can be achieved especially with the existence of different fintech apps to facilitate savings. The reason why it’s important is that these fintech apps have a way of encouraging young people to save and each of them serves different purposes. For instance, a particular app could make it a lot more difficult to withdraw than others.
Monitor your spending
This can be achieved through various ways and one of them includes the use of a spreadsheet to track earnings and expenditures on a monthly basis. This is helpful especially in tracking where your money goes and gaining a better understanding of your financial lifestyle. Sequel to identifying your spending pattern, it is quite pertinent to use that in planning your financial future using a budget as this might help you to be mindful of overspending. For example, by working out how much money you make each day (or a week, or month if you prefer), as well as how much you spend in that same period – not just on daily expenses but in rent, on subscriptions, for insurance, etc. – you can very quickly paint a picture of what sort of financial trajectory you’re on.
The importance of holding funds as a precautionary motive of holding funds cannot be overemphasized because doing this helps you to better manage emergency situations. Emergencies could be loss of job or anything situation that might temporarily incapacitate you from being able to earn revenue within a given period. Holding funds for emergencies could be in the form of savings accounts or some liquid assets (easily convertible to cash).
Invest accumulated savings
The purpose of savings should be for investment especially when it is accumulated over time. They are different investment options to try, short term or long term or investment based on risk appetites such as mutual funds to bonds, treasury bills, and equities. Also, there are other investment options such as investing in commodities such as crude oil, silver, gold, and foreign currencies. Most of these investments can be done through the direct investing platform of some banks and the commodities can be traded with ease on some online sites.
Financial Security and Growth Management
Another important form of ensuring financial security and growth aside investment is insurance. Insurance is an important aspect of investment in which there’s often little wiggle room. The reality that most people take rather careless is that they need insurance to protect themselves from falling on hard times. However, it’s challenging to map out a strategy to manage insurance costs because various insurance policies involve varying variables and considerations, therefore, insurance costs form a formidable part of the regular expense in developing a financial plan.
I would like to hear from you on strategies you have adopted to manage your finances, kindly share your knowledge in the comment box.