Is there a perfect formula to stop worrying about money and be sure you always have savings to deal with the unexpected? How to properly manage your budget and personal finances? Ensuring your financial security comes with a solid foundation - and those foundations start with solid budget management. The key to successfully managing your personal finances is simple. It's a bit like a house: you need to create a solid foundation, build the upper floors, and of course, have a roof to be always protected no matter what happens above your head. Life insurance plans and annuities for retirement offer this kind of security. Then, once you built that financial security, you can set aside money for holiday spendings, education and your dream home.
And if you thought a family budget worksheet was enough for sound personal finance management, read this article carefully till the end. Likewise, if you know someone who has trouble managing their personal finances, please share this article to help them. This financial education article will teach you how to handle a personal budget and handle a budget surplus. Or more precisely, how to invest it. But first, let's talk about your financial goals.
What are your personal financial goals? What level of comfort do you want to achieve? What level of financial security would you like to have? Do you want to start your own busin1. ess someday? Do you want to buy your dream house?
Be clear about your financial goals and what's important to you: Once you have your overall plan, you can break it down into weekly and monthly goals. How much income do you want to have in a year? In 2 years? In 5 years?
All money management starts with an estimate: how much do you need to make this project a reality? Write down your goals and how much you think you can save each week and each month. Seeing your goals written will help you stay motivated and stay disciplined.
But for these goals to be realistic, you need to know the state of your personal finances:
- your spending,
- your income,
- your cash flow.
Ideally, your income covers your expenses and allows you to make some savings. And we have a tip for you to set some savings goals and achieve them.
Do you know the Kakebo? This financial tool is an elementary family budget planner from Japan. The principle of Kakebo is simple to get your house, family, finances in order. Good news for you, we have simplified a Kakebo and created a free printable family budget template to help you reach your financial goals. Use the notes section to explain the variances between your budgeted and actual expense, and jot down ideas to make changes to trim costs further.
Write down in a physical notebook or on our printable budget worksheet every expense or purchase, even the smallest expenses like your daily morning coffee.
- Automatic subscriptions that you had forgotten,
- Essential expenses that you just can't cut off,
- Non-essential expenses,
- Unexpected expenses that need an emergency fund.
Sometimes the small daily expenses will be a real drain on your budget and put a strain on your personal save a few hundred dollars in a month by preparing your meals at home as well as your drinks to go.
Keeping your payment receipts will help you keep track of your expenses and where the money goes. (And we know you often wonder this question at the end of the month). Recording expenses each day will empower you in your finances. Each page of your budget planner should mention:
- Your savings goal prominently at the top of your page,
- Your expenses (essentials, pleasure expenses, culture and leisure expenses, and extras)
- Your income
- Your savings made at the end of the month
Another tip to see more clearly in your budget is to write down your after-tax income, the net amount.
You should see where the money goes after a few days and reshape your lifestyle and financial choices!
The fundamental question to ask yourself for each expense is, "Is it really necessary?". This simple question can help you manage your budget easily. Whether it is an object or a service, ask yourself whether you die will it be beneficial? Your life and your financial planning become much easier when you focus your budget management on the essentials:
- Good quality food
- Medicines and other health products
- Investments giving you financial security
- A pleasant place to live where you are safe
You don't need to restrict yourself your spending all the time. But good management of your budget is a matter of right, conscious choices. The choice of financial security or immediate pleasure. The choice between a healthy lifestyle and health problems to come. It is ultimately a choice between the long term and the short term result. Long term asks a bit of effort, and short term will cost you more.
For instance, do you really want a cookie? Or should you opt for a homemade smoothie?
Choosing the best way to spend money can be a bit difficult at first. But when you see your health, finances, and life improve, you will experience greater satisfaction.
Knowing your credit score is essential for managing your budget. Indeed, you need to know where you are starting to have a clearer view of your personal finances. You also need to know your debt level.
Ask your bank and card issuers for your credit score. They can provide it to you for free once a year. And write down the next due date for another credit report in a year.
It's the perfect occasion to verify that no one has stolen your identity to open a line of credit in your name, which could harm your credit history.
An algorithm and the basis of your repayment history calculates your credit score. Here are some questions to ask yourself to manage your budget well starting next month:
- Do you pay credit card bills on time?
- What is the average of your delay in general?
- How much debt do you have on each card and each loan?
- Is there a credit card or loan that you have successfully paid off?
- Do you manage to have several credit cards at the same time?
- List each credit card you hold, their current balance and their current interest rate. Rank these credit cards from the highest interest rate to the lowest.
Write these elements on a page near your budget planner to have this information written in black and white. Knowing the amount of debt on each credit card and its increase is essential to your budget management.
Good budget management is not just about cutting expenses or setting aside. It is also about getting rid of your debt. Now that you know the amount of debt on each card, you also know which card is costing you the most. So pay first the credit card with the highest interest rate. And pay the minimum on other credit cards.
Likewise, when you take a discounted credit card, write down the date the promotion ends on your agenda. Make sure this card has little debt when the expiration date arrives. Another thing that might help you to handle your budget:
When shopping for a credit card, pick one that gives you travel points or great discounts. Cutting expenses is not reducing your lifestyle but enjoying ore coupons and cash backs.
Then set up the pre-authorized debit. Your banker is going to hate you, but don't worry. You will thank us for the advice in 10 years. Because you will have saved much money without paying the exorbitant interest rates that banks charge you.
Finally, call your credit card issuer and ask for a cap on your credit limit. This cap will force you to stay within your budget by not spend any more money beyond that limit. Don't believe the myth you have to maintain debt on your credit cards to build a credit history. This myth is entirely wrong. Use your credit in the limit you have and payback. That is a fair use of the credit card.
Once you have paid off your credit card, you shouldn't close it. Just freeze it. Closing the account will reduce the total amount of your available credit and cause your credit score to drop. Simply delete this card from all your online accounts, all automatic payments to avoid the temptation of using it.
Sometimes it is not possible to reduce expenses further. To save more money, you need to earn more money.
Think about how you can increase your income column. Good budget management also means adding more to what gets in your pocket.
Could you find another source of income besides your job? Maybe that's what you used to do when you were a student. Invest some of your time to think about how to increase your income.
Assets are elements that generate resources. Many people have taken advantage of the Internet's opportunities to create assets alongside their careers: why not you?
video: "Jeremy financial education"
How could you create assets that generate income besides your day job? Here are a few ideas:
To improve your personal finances, you need to focus on what you can control to prepare for the future. You will not be able to control how the economy evolves. We live in a world where the rules change, and the unexpected happens every day. No one predicted the arrival of COVID and its impact on the economy. But you can plan for the future by providing an emergency fund.
If you were to lose your job tomorrow, do you have enough to live on for three months, or are you going to depend on your credit card? Or worse, if something happened to you, would your family have enough to live? Everyone should have some emergency cash on hand to support themselves for three months. Life can be turned upside down by
- A critical illness,
- A loss of employment,
- An economic upheaval.
You have the choice, but we advise you to do both:
- Put some money aside, hoping you will resist the temptation to touch it.
- Get a term life insurance
The ideal is to combine the two because this gives you two emergency funds for any unforeseen events. And you will be relieved in the case of medical bills, home repairs or other emergencies. Combining savings and insurance gives you peace of mind on the one hand, and on the other hand, you don't have to borrow money from the bank. Even better, other solutions exist, such as participative insurance. With such a plan, you can invest your money and make it grow. Another advantage of insurance? The benefits paid are tax-free most of the time.
To conclude on your budget management.
We are sure that you printed your family budget planner and have it above your office from now. Ideally, you should pay off your credit card debts within a few months, lead the game with the bank and the credit companies, and generate more income. We will be happy to help you manage your personal finances by offering you protection plans tailored to your situation to help you reach complete financial security. To be contacted by an advisor, we invite you to complete our short free quote form.
Written by Diane Taes