A Guide on Making a Personal Financial Plan
A Guide on Making a Personal
Do you now what you spend weekly, monthly, or yearly? The process is easier than you might think, and can help you to stay in the black. Here are some tips to make managing your money easier:
- Distinguish your fixed and variable items
Fixed items include expenses such as rent or mortgage payments, and car or health insurance. Meanwhile, variable items include expenses such as grocery or restaurant bills. To calculate the cost for variable items, save your receipts for a month and then estimate approximately how much you spend monthly for those items. While this process isn’t an exact science, it will help you manage your money better.
- Set aside cash for certain expenses
This is one of the best ways to ensure that you don’t spend beyond your monthly means. After being paid, place amounts for fixed and variable expenses, inside individual envelopes. This is a tactile method for ensuring that the money you’ve planned for certain expenses will indeed be spent on those items. To ensure that you won’t “cheat,” seal the envelops to avoid the temptation.
3. Reduce or eliminate unnecessary expenses
This doesn’t mean that you have to deprive yourself of any luxuries. If you want to reduce debt or have surplus cash sooner, then reduce or eliminate all expenses that aren’t really “necessary.” For instance, you could buy a 24-pack of sodas, instead of buying them in pricey vending machines. You could also reduce how many sodas you drink daily, or stop drinking them completely! All of these actions can help to trim your spending.
- Avoid impulse purchases
This is one of the biggest threats to controlling your personal finances. Too often we find ourselves tempted to buy something on-the-spot, which we haven’t planned for. While it’s OK to make some purchases that you haven’t planned for, it’s a huge mistake to make those purchases without contemplating whether it’s a wise purchase. So instead of making impulse purchases, take the time to determine if you can squeeze the item into your financial plans. If you can’t, then you should definitely avoid making the purchase.
- Buy goods and services using cash whenever possible
While sometimes it’s impossible to make purchases using cash, do it whenever possible. Using credit cards is one of the fastest ways to dig yourself a hole of debt. By failing to pay your balance in full, you can easily end up spending three times the cost of a good or service after the interest has accumulated month after month.
Controlling your personal finances is definitely one of the most effective ways to stay in the black. Follow these tips to take control of your personal finances.
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