Everyone needs to deal with their finances. From learning how to track expenses to planning for retirement, money is an integral part of modern life. Solid financial management means you have your bills paid, you have funds going into a retirement fund, and you have money in savings to cover emergency costs. You also have money targeted towards specific financial goals and costs. If you are ready to get ahead of the curve, let's look at a few ways to manage your finances.
Create a Budget
You need to know how much money you have coming in and how much money you have going out. Track your income and expenses for a few weeks. You will get a good idea of how your money is flowing in and out. Use that information to formulate a budget. Using the tracking information, delegate a certain amount of income into each category (rent, utilities, groceries, eating out, etc.). Continue to track your actual expenditures against your budgeted amounts and make adjustments accordingly.
Plan for Major Purchases
Impulsive or poorly planned purchases can derail even the most financially stable person. If you want to buy a car or a house, plan for it. When possible, save up your money and pay cash for it. If paying entirely in cash is not possible, save as much as possible for a high down payment. A higher down payment will help lower your monthly payments and can even give you a lower interest rate.
Use Credit Wisely
Building a solid credit report will help you get lower interest rates and better loan opportunities. Getting a credit card will help build that solid record. However, you need to use credit wisely. Pay off your balances promptly. Use only about 10% of your available credit. This will build your credit record, without a lot of debt. Putting a small amount on a credit card every couple of months will demonstrate a wise use of credit, especially if you pay it off the same month.
Consolidate Your Debt
If you already have built up debt, it is important to pay it down. Consolidated credit payments at a lower interest rate can help by lowering monthly payments. It will help ease a tight budget and give you more money to put towards debt or living expenses. You can do this by transferring balances to a low interest credit card or with a debt consolidation loan.
Leverage Retirement Plans
If your employer offers retirement planning options, take advantage of them, especially if they offer matching funds. Many employers also offer access to retirement planning professionals. Take advantage of all of these opportunities. It will give you a boost in retirement planning at little to no cost to you.
Purchase Insurance Wisely
Insurance allows you to plan for the unexpected. For example, health insurance is there to help you cover medical costs. Most of the time it will help with check-ups and medical maintenance. But, it will also be there in case of an accident or severe illness. Insurance you should consider includes health insurance, life insurance, homeowners insurance, car insurance, and disaster insurance.
Build an Emergency Fund
Do you have the money to cover an emergency expense, like an unexpected car repair or a broken fridge? If you would need to rely on a credit card, you are not prepared for emergency expenses. That is what an emergency fund is for. Start putting a set amount aside every paycheck. Put it in a special savings account. Plan on building up 3 to 6 months worth of living expenses.
Work with Your Partner
If you are married or in a long-term relationship, you need to consider your combined futures. That means having discussions about buying a home, creating retirement income and determining how far to combine finances. It is important for each person to have his or her own financial foundation, but just as important, the couple need to have a combined vision for future financial planning.
These are just a few ways you can start gaining control of your finances. Think of each hour you spend on your finances as an investment in your future financial stability.