Personal Effective Money Management
Michael Owokiigbe
For some people, personal finance management is a passionate hobby, while for others it’s a daunting chore. Either way, personal financial planning – including budgeting, tracking your spending, and saving – is crucial if you want to get out of debt and reach your financial goals.
So what’s required in good personal finance management? These 5 steps are the building blocks to healthy money management.
1. SET YOUR TOP FINANCIAL GOALS
Identifying a strategized financial plan is key – this step helps you understand the purpose of the subsequent steps and provides you with direction when it comes to your money. Are you hoping to get out of debt so you can focus wholeheartedly on a down payment for a house? Do you want to set aside 10% of your income starting now to work on your retirement nest egg?
These are examples of short-term, medium-term, and long-term financial goals. Aim to set one from each category, but if longer term goals seem like an intimidating commitment, that’s okay too. Instead, think of the near future: My goal is to save $1,000 this year for my retirement. Breaking enormous goals into smaller chunks (and smaller amounts of money) makes them much more palatable.
With these goals in hand, you’ll be motivated to budget, automate your savings, and stay away from debt. After that, you can more easily take on bigger plans for your financial future like retirement savings, an emergency fund, and investment accounts.
2. MAKE SURE YOUR GOALS ARE SMART.
Be your own financial planner and Set SMART financial goals – specific, measurable, attainable, realistic, and timely – to set yourself up for success. An important part of goal setting is also coming up with a list of potential obstacles and ways to overcome them. By creating your contingency plan right from the get-go, you won’t stumble and falter when life gets in the way of your plans.
3. DEVELOP THE HABIT OF BUDGETING.
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HomeManage Money BetterSteps for Effective Personal Finance Management and Planning
Steps for Effective Personal Finance Planning and Management
For some people, personal finance management is a passionate hobby, while for others it’s a daunting chore. Either way, personal financial planning – including budgeting, tracking your spending, and saving – is crucial if you want to get out of debt and reach your financial goals.
So what’s required in good personal finance management? These 8 steps are the building blocks to healthy money management.
1. Set Your Top Financial Goals
Identifying a strategized financial plan is key – this step helps you understand the purpose of the subsequent steps and provides you with direction when it comes to your money. Do you want to save up for a family holiday next summer? Are you hoping to get out of debt so you can focus wholeheartedly on a down payment for a house? Do you want to set aside 10% of your income starting now to work on your retirement nest egg?
These are examples of short-term, medium-term, and long-term financial goals. Aim to set one from each category, but if longer term goals seem like an intimidating commitment, that’s okay too. Instead, think of the near future: My goal is to save $1,000 this year for my retirement. Breaking enormous goals into smaller chunks (and smaller amounts of money) makes them much more palatable.
Financial management lightbulb.
With these goals in hand, you’ll be motivated to budget, automate your savings, and stay away from debt. After that, you can more easily take on bigger plans for your financial future like retirement savings, an emergency fund, and investment accounts.
2. Make Sure Your Goals are SMART
Be your own financial planner and Set SMART financial goals – specific, measurable, attainable, realistic, and timely – to set yourself up for success. An important part of goal setting is also coming up with a list of potential obstacles and ways to overcome them. By creating your contingency plan right from the get-go, you won’t stumble and falter when life gets in the way of your plans.
3. Get Into the Habit of Budgeting
Ask any personal finance aficionado what they do to take care of their personal finances, and budgeting will be a prime example of what they do steadfastly. Your budget – designed by you – dictates how much you can spend each month based on your income. When you’re sticking to a carefully constructed budget plan, you will have what you need and won’t be tempted to use credit to spend beyond your means.
What is a Budget?
If you’re building a budget from scratch, start with all of the income you generate each month – this is how much you have to work with. On the other end of the equation are all of your expenses. Your expenses can be categorized into fixed (rent, bills, transportation) and variable expenses (groceries, eating out, shopping, entertainment). If you’re dealing with debt, you need to ensure that debt repayment is factored into your expenses. Savings, maybe your most important expense, is also considered an expense when building a budget and working toward financial stability.
4. TRACK YOUR SPENDING.
Credit Counselling Society
Manage Money Better
Improve your money smarts with small changes that lead to big gains.
HomeManage Money BetterSteps for Effective Personal Finance Management and Planning
Steps for Effective Personal Finance Planning and Management
For some people, personal finance management is a passionate hobby, while for others it’s a daunting chore. Either way, personal financial planning – including budgeting, tracking your spending, and saving – is crucial if you want to get out of debt and reach your financial goals.
So what’s required in good personal finance management? These 8 steps are the building blocks to healthy money management.
1. Set Your Top Financial Goals
Identifying a strategized financial plan is key – this step helps you understand the purpose of the subsequent steps and provides you with direction when it comes to your money. Do you want to save up for a family holiday next summer? Are you hoping to get out of debt so you can focus wholeheartedly on a down payment for a house? Do you want to set aside 10% of your income starting now to work on your retirement nest egg?
These are examples of short-term, medium-term, and long-term financial goals. Aim to set one from each category, but if longer term goals seem like an intimidating commitment, that’s okay too. Instead, think of the near future: My goal is to save $1,000 this year for my retirement. Breaking enormous goals into smaller chunks (and smaller amounts of money) makes them much more palatable.
Financial management lightbulb.
With these goals in hand, you’ll be motivated to budget, automate your savings, and stay away from debt. After that, you can more easily take on bigger plans for your financial future like retirement savings, an emergency fund, and investment accounts.
2. Make Sure Your Goals are SMART
Be your own financial planner and Set SMART financial goals – specific, measurable, attainable, realistic, and timely – to set yourself up for success. An important part of goal setting is also coming up with a list of potential obstacles and ways to overcome them. By creating your contingency plan right from the get-go, you won’t stumble and falter when life gets in the way of your plans.
3. Get Into the Habit of Budgeting
Ask any personal finance aficionado what they do to take care of their personal finances, and budgeting will be a prime example of what they do steadfastly. Your budget – designed by you – dictates how much you can spend each month based on your income. When you’re sticking to a carefully constructed budget plan, you will have what you need and won’t be tempted to use credit to spend beyond your means.
What is a Budget?
If you’re building a budget from scratch, start with all of the income you generate each month – this is how much you have to work with. On the other end of the equation are all of your expenses. Your expenses can be categorized into fixed (rent, bills, transportation) and variable expenses (groceries, eating out, shopping, entertainment). If you’re dealing with debt, you need to ensure that debt repayment is factored into your expenses. Savings, maybe your most important expense, is also considered an expense when building a budget and working toward financial stability.A
5. STAY OUT OF DEBT.
Don’t feel like you can’t adopt great personal finance habits simply because you’re in debt. Look at the world of personal finance bloggers and you’ll stumble upon many who have either pulled themselves out of massive amounts of debt or are currently doing so.
But a key tactic is focusing on avoiding debt. This means paying off your debts. Many people start with the account with the highest interest rate, others start with the smallest debt, however all agree that you must stash away the credit card to avoid accumulating more.
Getting out of debt and managing debt will give you peace of mind and as you’re chipping away with debt repayment, the stress will alleviate too.
These five (5) points have proven to be effective, but only if applied accordingly and with discipline.
