In the article it is spoken in detail about The Best Way to Manage Your Personal Finances. Today more than ever it is important to keep your personal finances in order. The instability of the global economy makes the management of personal finances ever more challenging. Here we will provide some basic tips to make managing your money easier.
Start with a budget
Write down all your monthly expenses. Start with the big ticket items like home and car payments. You can then add your monthly utility bills (gas, electric, phone, cable TV, etc…). Don’t forget your cell phone bill. Next, add in your monthly grocery expenditure. Finally, calculate other expenses that you have on a regular basis such as medical bills, pet care costs, club memberships, entertainment and any other place where you spend money.
It helps to review your bank and credit card statements when calculating your monthly budget. You might want to make a point to save all your receipts during the month before making your budget calculations.
Finally add in miscellaneous costs. These could include car repair bills for example. Even though you don’t spend on this every month you should estimate how much you think you spend per year then divide by 12 and include this number in your budget.
Calculate your income
Total all your income per month after taxes. Don’t forget to include all types of income here such as interest collected and any rent paid to you.
Calculate savings per month
Now you can subtract your monthly costs from your monthly income. If your costs are greater than your income you should closely analyze your budget to see where you can make modifications. Do you really need that club membership? Could you sacrifice going to the movies or eating out once in a while? On the other hand you might want to look into another source of income. When you finally bring your costs below your income then you can start saving.
What to do with savings
First of all you might want to open a savings account with a favorable interest rate while you decide. This allows your money to grow and keeps it safe. How you invest your savings depends a lot on time. Are you investing for the long term or the short term? Also, you should ask yourself what you are saving for. For example, you might want to start your own business which would require planning quite different than saving for retirement.
The next part of the decision making process includes risk. Are you willing to take on more or less risk? As the potential for return increases so does the risk. For example, ultra-safe investments include things like US treasury bills or bank CD’s. Stocks are riskier, but over time the risk decreases especially when the stocks are chosen wisely. The safer investments will require less time spent on your part maintaining the investment.
Other options are real estate and precious metals (gold, silver, etc…). The best advice is to educate yourself on each option and maintain a habit of keeping yourself informed about your investment vehicles.
Every year you should sit down and review your financial performance. Tax preparation time is a good time to do this as you need to collect a lot of the information anyway. Did you make and save as much as you had hoped for? How did your investments do over the past year? At this point you should also plan for the year ahead and set income, savings and investment goals.