Learn how to manage your personal finances with these 30 guidelines
Learning to manage your investments is not a simple task. The amount of things you must have under control are endless: budgeting, debts, credit cards, mortgages, savings, interest rates, etc. It is a daunting task indeed.
On top of that, there is a factor that really can take it all down: emotions. Emotions can really be a big obstacle between yourself and your finances.
Some of us just get plain stressed whenever we think about the importance of personal finance. Others cannot think of anything worse than budgeting. And plenty of people get side-tracked by the next new finance craze, like crypto-currencies or peer-to-peer lending.
Therefore, to learn how to manage money better, here are 30 personal finance guidelines.
Financial tips for managing money
This is the most important piece of advice. Plan your budget and stick to it. As C. Maxwell said, “A budget is telling your money where to go instead of wondering where it went.”
Help yourself with burget apps
The second tip in the list is to help yourself with budgeting apps. These apps can assist in gathering all the information in one single place that you can reach at any time.
Visualise it wiht a financial calendar
Financial calendars can be a great tool to visualise and plan where your expenditures will go and when so that you can plan your month between payslip and payslip more efficiently.
By creating a financial calendar, setting reminders for financials tasks, such as paying quarterly taxes and checking your credit report you will save a ton of hassle down the road.
Track Your Net Worth
What is your net worth? It is as simple as taking the sum of all your assets and deducting the sum of all your debts. Keeping track of your net worth is a great way to make sure money is not being spent in things you do not really care.
Avoid impulsive purchases
Everyone is tempted to purchase things they do not need most of the time. However, these can deplete your bank account rather quickly.
Although it may sound obvious, a great way to avoid spending impulsively is to put yourself a grace period by which you will think such purchase through. For instance, a week or two between the first time you think about it works great. If after two weeks you do not think about it, you will not acquire it. If you can stop thinking about it after so long, you would even enjoy it better.
Financial tips for managing debt
Be honest to yourself about your debt
Same as when you keep track of your net worth, it is even more important to keep detailed track of every dollar you own. Write down everything you owe, as well as the interest rates, monthly minimum payments, and any loan payback lengths. Then, keep this document up to date.
Control interest rates
Interest rates represent the cost of debt. Therefore, you must understand very well the various interest rates of your debt to determine which debts to pay off first and which credit cards to avoid.
Learn about compound interest, as a compounded rate (for instance in case of accruals of interest) can quickly erode your current and future net worth.
Albert Einstein described compound interests as follows: “Compound interest is the eighth wonder of the world. He who understands it, earns it; he who doesn’t, pays it.”
Pay off your debt
- Avalanche: focus on paying off the debt with the highest interest rate first. This method aims to reduce the amount of money you pay back overall.
- Snowball: Focus on paying off your smallest debt first, regardless of the interest rates. Although you may pay more overall, the sense of empowerment and achievement could help you pay off your debts faster.
Financial advice on credit
Avoid Debt and Learn About Credit
In fairness the best credit related advice, and one of the best tips overall regarding personal finance: Avoid debt. Thomas Jefferson said, “Never spend your money before you have it.”
Having said that, the best hedge funds and private equity funds use debt aggressively for a reason. Used correctly it can be a powerful tool.
When used effectively, it can help you purchase a house, a car, etc. However, when used irresponsibly, it could lead to an ever-increasing amount of debt that only gets worse as interest rates kick in.
Make sure you have control of your credit score
Your credit score affects your ability to rent a house in certain places, purchase a car, get a mortgage, or even sign up for basic utilities. Hence it is critical to understand how credit works, and check your score regularly.
Keep your credit utilization rate low
Your credit utilization rate is a measure of how much of your available credit you are using. For example, if a bank provides €1,000 on a credit card and your use €250, your credit utilization rate would be 25%.
As the credit utilization rate increases, your credit score gets worse. So, the general rule of thumb is never to let your credit utilization rate be more than 30%.
Financial advice on savings
Create a Savings Plan
Turn your wishes into goals by creating a savings plan. Work out what you are saving for and how much you plan to save every month. Then, try to get into a rhythm of putting money aside each month.
The 50/30/20 Rule
If you are struggling with budgeting and saving, consider following U.S. Senator Elizabeth Warren’s 50/30/20:
- 50% on basic needs: groceries, housing, utilities, etc.
- 30% on leisure and desires: dining out, shopping, hobbies.
- 20% on savings.
Pay Yourself First
Do not spend your money and save what is left but, instead save first and then spend what is left.
Personal finance expert Dave Ramsey: “Saving must become a priority, not just a thought. Pay yourself first.”
Put your savings away
Avoid picking from your savings stored in your current account by putting that cash away: create a savings account. In addition, some bank accounts pay a little interest on money held in savings accounts.
Financial advice on savings
Reduce redundant expenses
Although perhaps surprising, there are people earning more than €10.000 per month that spend it all. It does not matter how much you earn if you end the month with a balance of zero. Try to cut back on expenses to boost the amount of money you can save and invest each month.
You could save money on big expenses such as renting by moving into a smaller property or moving to a cheaper area. You could also cut back on the amount you spend on shopping and eating out.
Increase your revenues
You can budget, save, and be mindful of your spending until the cows come home, but eventually, you will hit a wall. Try to find ways to increase your income There are endless ways, but Brickken can help you start putting your money to work by investing in property.
Start a job on the side
Starting a second job, although tiring, is a great way to boost your income if you need money. There are countless secondary job opportunities out there.
Ask for a pay raise
One of the easiest ways to boost your income is to do a good job negotiating your salary when starting a new job.
One of the easiest rules is to never share your current pay rate. You should aim to get the potential new employer to give a figure first. Then you can focus on pushing it higher.
Financial tips for investing
Earning more money does not mean to increase your lifestyle
When you start earning more money, beware a common trap called “lifestyle creep.” This is when the amount of money you spend increases alongside your income.
For example, when you get a raise, you might decide to buy a new car. It is best to rest the temptation.
Dedicate time to improve your financial education
When it comes to money, you are responsible for improving your situation. So, take the decision to dedicate some time each week to learn more about money. Thankfully, there are plenty of great personal finance blogs out there.
As Benjamin Franklin said, “An investment in knowledge pays the best interest.”
Invest in yourself
Before you start investing in stocks, or real estate, you may want to invest in yourself first.
If you have not got yourself in a business or career, your money may be better spent on developing the skills and educating yourself in a way that will allow you to increase your earnings over time.
Learn about various investing instruments
This is one of the most important financial tips. In general terms, we can say that an asset helps you to obtain economic profit, while a liability takes money out of your pocket.
Through Brickken, any investor can access investments in assets such as property or art with a minimum of necessary capital available to anyone. Through tokenization technology, any investor can invest in homes from € 100 and start generating passive income generated through the rental of said home. Other examples of assets they can invest in are artwork, infrastructure projects, commercial properties, etc.
Invest in assets, not in liabilities
This is one of the most repeated advices out there, repeated over and over by the wealthiest people in history.
An asset puts money into your pocket, and a liability takes money out of your pocket.
The rich own assets and the poor do not. In short, if you want to be rich, you need to buy assets, not liabilities.
Start investing today, not tomorrow
When it comes to investing, time is key.
As discussed earlier, compound interest can revolutionize your finances over time, so start investing now and you grab your rewards later. So, put your money to work for you now.
Financial tips to control expenses
Focus on yourself
Comparing yourself to others is a highly effective way to make yourself miserable.
Focus on yourself and your finances: you are only competing against yourself.
Learn how to be frugal, not cheap
Frugality is empowering: the idea is to prioritize your spending. On the other hand, being cheap is the concept of trying to spend less on everything, all the time, no matter what.
In short, do not be cheap, be frugal.
Establish your own personal finance goals
The best way to make your money work for you is to have a proper goal.
What do you want? A house? To retire before you are 50? An emergency fund? Send kids to college? a holiday?
Take Your Values Into Account When Making a Purchase
A famous saying goes: “Too many people spend money they haven’t earned to buy things they don’t want to impress people they don’t like.”
Do not be one of them. Carefully think every purchase you make and ensure it fits with your values.
Discuss Finances with Your Significant Other
It is a good idea to discuss your finances with your half orange. After your marry, every asset is jointly held. That is why you both need to be in sync on your long-term financial goals, from paying off the mortgage to putting away for retirement. Ideally, you should talk about all this before you wed. If you do not, you can end up deeply frustrated and financially spent.