Money can be quite fleeting, especially during the times we live in. The ongoing pandemic has brought several drastic changes to the market—job security isn’t what it used to be and certain prices seem to keep hiking so that an unnecessary purchase today can come back to haunt you when you’re in need of money down the line.
That’s why you should take steps to responsibly manage your money. There’s no need to hire an expensive financial expert. You can keep an eye on personal finances yourself. Here are the 5 ways to manage your money responsibly.
1. Always Have a Plan
A person can’t manage money if they don’t have a plan to follow. A financial plan is key for properly managing your money.
Keep in mind that a financial plan includes more than just trying to save the dollars remaining at each month’s end after all the bills are paid and you have created a budget for next month. Such a plan also includes expenditures you can’t avoid (birthday gifts, repairs, etc.) as well as investments.
To create an effective financial plan, you should write down what you wish to achieve, wealth-wise, in the next 5-10 years. Having one or more goals ) in mind will help you stick with the plan you create.
2. Investing in the Bigger Picture
A great way to manage money is by investing it. It’s no secret that we all grow old. Thus, it’s never too late to begin planning for your upcoming retirement. The thought of growing old shouldn’t overwhelm you, of course. You should still enjoy the young years you have. But always have retirement goals in your financial plan, so you are reminded of the bigger picture from time to time.
Even if you don’t currently have a lot of money, you should start making financial calculations. Using a reliable investment calculator, you can create goals and estimate the future growth of your portfolio.
Such a calculator gives you a baseline that you can build on. See if you can start saving toward a small investment in one or two years that can help increase your monthly savings and improve your portfolio.
For instance, you might aim to own a rental property after a certain number of years. Many people aim to invest in a couple of houses or even an apartment complex which they can rent out and get the funds to live comfortably when they grow old.
3. Have Emergency Savings
Having an emergency savings fund can prevent you from incurring debt when unexpected expenses arise. You don’t have to be over the top when putting money aside for emergency savings. But the emergency fund should have at least three months of living expenses.
Also, do not confuse your emergency funds with your investment or purchase funds. Keep everything separate. The emergency funds are meant for just that…emergencies!
4. Remember to Treat Yourself
Managing your finances responsibly doesn’t mean you can’t have fun in life. Being too strict with spending will annoy you when trying to follow a financial plan. The last thing you want to go through is allowing the frustration to force you into using your savings fund to make an unnecessary purchase.
So, make sure that your financial plan has room for little treats along the way. You deserve to have money to book a ticket for a movie you are excited about or go out to dinner with friends or loved ones. A bigger treat could be an international vacation if you meet certain saving goals.
5. Learn About Taxes
Financial planning requires you to understand income taxes. It can be boring work, but it’s vital. When you get your first paycheck at a new job, always look up how much money you will be left with after taxes so you can have a better understanding of what type of financial plan works best for you.
Wrapping It Up
Learning how to properly manage your finances will take time. So, be patient with yourself and allow room for mistakes. Remember to always start by creating a detailed financial plan. And don’t hesitate to make certain changes depending on how your personal and professional situation changes over the years.