Sunday, March 27, 2011

A Practical Guide to Personal Finance

To save or not to save money? We are always confronted with the same question of whether we can save money or not while trying to make both ends meet. It is best that we have the skills on  financial management  to be able to save money, and not to be trapped into debt. Here are practical ways on personal finance :

save money

Planning and Educating Self about Personal Finance.   Make the best out of the income at hand. We might be enjoying too much of spending without thinking over our financial status, for all we know we are already drown into debt. Take time to sit down, evaluate cash flow summary and jot down concrete plans on  how to stretch the income. It is not always that we are healthy or we have regular jobs to sustain our needs and when a financial crisis will strike upon us.

Increase the Income.   If the income is not sufficient for the needs, start finding ways to increase it.   Every family have different financial situations, it should be discussed both by husband and wife  on how to augment the need of the family.  Know your priorities, is two-income earner workable or one should sacrifice taking care of the family. If one should stay in the house, home based freelance jobs either traditional or online jobs can help increase the income without sacrificing time for household management.

Reasonable Spending Habits.
Identify "what you need" and "what you want".  It is always like a tug-of-war between these two, but "what you need" should come out as a winner and only let "what you want" if you have already set aside extra funds for it. Failure to do so becomes  an impulse buying habit.

Know what are income generating expenses from lifestyle expenses.   Income generating expenses or the basic needs such as utilities, transportation, food,gasoline while lifestyle expenses such as mobile usage, clothing, recreational expenses which can be adjusted or cut off as need arises.  In some cases, there can be exceptions for mobile usage if it is use for income-related  activities such as in sales while Internet expenses for freelance online jobs.

Think of long term “things to buy" or expenses that requires bigger funds such as purchasing a new appliance, renovation projects, long term investment and so forth.  Moreso,small sacrifices to save money can create funds for long term plans.
Live moderately and find effective ways to reduce cost at home such as expenses for electrical appliances and Do-It-Yourself  skills can spare us from service professional expenses.

Use Credit Card Wisely.   Remember that everytime we use it we have a debt to pay. Is the purchase worth buying or are we into impulse buying. Credit card is not bad if we know how to use it for our advantage. Some business people use it as their capital and roll the cash until it is due. By this time, they have earned the profit.
Study monthly statement carefully and keep track all your expenses if it is properly billed.
Pay on time before the deadline and try to pay all the amount due. If you are paying only the minimum, you are just paying for the interest rates. The credit card company is just getting richer because of the monthly interest charges.

For small purchases, pay it in cash instead of using the credit card.

Do not make a long list of credit cards, get only what you can manage.

In order  to save money, live within your means. If you want to live more than what you have, increase your income. Whatever what you have in your hand big or small, savings depends on how you manage money.  Make a monthly effort to set aside even a small amount of savings and gradually increase whenever you can.   Financial security can be achieved  if we know how to save consistently.