Did you know that the median wage for workers in the United States is a little over $950 per week? Regardless of how much money you make each year, if you don’t know how to use it properly, you can dig yourself into a major financial hole.
The good news? Making smart personal finance decisions is easy, as long as you know and understand the numbers and have a solid plan in place. That may sound too good to be true if you’re new to the idea of finance management, but you’ll soon see that things aren’t as complicated as they appear on paper.
In this article, we’ll give you 7 tips to help you come up with your own financial plan that you can use to improve your overall quality of life. We’ll also breakdown and discuss a few common mistakes that people make with their personal finances, so you can be aware of them yourself.
1. Know How Much Money You Have Coming In
One of the hardest parts of personal finance management, especially for newcomers, is figuring out where to start. But before you can look at your personal cash flow, or create a budget, you first need to know how much money you have coming in.
That’s why your income is the perfect place to start your personal finance journey. So, if you don’t know already, figure out how much money you have access to each week or month, depending on which measurement of time works best for you.
If you’re a salary-based employee, this is easy, as that figure doesn’t change for you at all. If you’re not salary, try to come up with an average figure that you can work with, and underestimate it, too, so you have some wiggle room.
2. Set and Follow a Strict Budget
Once you have your personal income number figured out, you can now take a look at your weekly and monthly expenses and come up with a budget to follow. This may take a bit of time to sort out, but as you come across different expenses, be sure to round up on those charges, just to be safe.
Keep that budget nearby, perhaps on your phone, so you can check on it often to confirm you’re below your weekly or monthly spending amounts. And of course, don’t go over budget, and if you do so on accident, make sure to account for that error for the next few weeks.
3. Cut Back on Expenses Where You Can
One of the biggest tricks to efficient budget management, while often easier said than done, has to do with how much money you’re spending on a routine basis. Because regardless of what type of lifestyle you live, odds are there are more than a few expenses that you can cut out completely to help you save some extra cash each month.
So, when you’re making your budget, figure out what those expenses are and try to avoid them at all costs. That way you can give yourself a chance to put back some extra money each month and save, which of course is the overall goal here.
Not sure where to cut back on your spending? Take a look at how much money you spend eating out each month. If the number is high, cut back and start doing more cooking at home.
On top of saving money, you’re also more likely to eat healthier when at home, too, which is an added bonus. Also, making your own coffee, instead of swinging through your favorite coffee spot each morning, can help you save a few extra dollars each week.
4. Write Down Your Goals So You Can Seem Them
We’ve talked a lot about creating and following a budget, which is an absolute must if you want to improve your personal financial situation. It’s also a good idea to write down a few financial goals, perhaps on whatever document your budget is on, so you can start planning for the future.
When coming up with goals, try to think about both right now as well as the bigger picture. A short-term goal could be something as simple as paying down a credit card. And a long-term goal could be putting back enough money for a down payment on a house – it’s completely up to you and your wants.
Regardless of what your goals are, check back with them often so you can track your process. This will help keep you motivated and driven, increasing your chances of reaching those goals one day.
5. Plan for Many Different Financial Scenarios
We get it. You want to focus on the positives and only think about reaching your current financial goals. But, as much as it may be scary to do so, you need to think about other financial scenarios as well, including ones where things aren’t going the way that you planned.
Planning for a few different financial scenarios allows you to be ready mentally for whatever life could throw at you. This is especially important when planning for a worst-case-scenario, as preparation is something that can help you get out of a hole fast.
Need More Personal Finance Help?
As you can see, the best piece of personal finance advice is to be aware of everything that is going on. Know your cash flow situation, have a budget in place and be ready for anything and everything that life can throw your way.
Looking for more tips and tricks you can use to boost your financial portfolio? Check back with our blog often, as we’re always talking about everything related to both personal and business finances.