Good financial habits are hard to develop and harder to stick to. Sometimes, it feels overwhelming when you realize that managing your personal finances is a lot more than being able to control your expenses or maintaining a steady stream of income. Personal Finance compiles everything that directs your financial life to utmost stability and peace – paying down your debt, saving for the future, budgeting and everything else that is somehow related to money.
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While it might sound boring to formulate a budget or cultivate a frugal lifestyle, it will totally be worth it once you start noticing small positive impacts in your financial journey. Below are some of the most effective personal finance tips that will make you feel rich in your personal finance journey and will get your finances in order:
1. Track your net worth- Your net worth determines your overall financial standing and gives you the correct picture of your financial stability. Keep a track of your net worth – the difference between your assets and your liabilities. While your net worth might be negative at the start of your career owing to the debt component, your ultimate goal should be to increase your assets and pay off your liabilities. More the net worth, better the financial stability.
2. Set a workable household budget- Budget is an estimation of your income and expenses over a specified period of time, say a week or a month. Have a household budget in place to keep your expenses in check and to make sure that you save at least a certain amount every month to help support your future needs. I use a proper Expense Tracker and a Savings Tracker to keep my finances in check. Your budget shouldn’t be too rigid to follow but should be workable enough to include all your necessary expenses like groceries, utilities, etc. Having a budget is only effective if you follow it up on a regular basis and make changes when needed.
3. Cultivate a frugal lifestyle- Cultivating a frugal lifestyle should not be misunderstood as living cheap. A frugal lifestyle is anything that helps you save money by making small changes in your spending habits. Here are some of the most effective frugal living tips that can help you save money in no time:
- Pay your bills on time to avoid any late fees.
- Use discount coupons and avail cash backs while shopping online.
- Control Impulse spending and avoid spending money on things you don’t need.
- Wait for products to go on sale than having to pay a full price for them.
- Prefer eating home cooked meal over eating out. Also create a weekly meal plan in order to save money on groceries and to avoid wastage of food.
- Resort to the option of effective meal planning to save money on groceries. If your schedule doesn’t allow you enough time to plan your meals, $5 Meal Plan can be the ultimate solution to your problem. They have made meal planning absolutely simple for me and I’m not leaving them anytime soon.
4. Set Specific financial goals- Have specific financial goals in place for the future. Have a picture in mind as to where you would like to see yourself 5 years from now, 10 years from now, 20 years from now and 30 years from now. When you know your financial priorities, your personal finance journey gets much easier. So when you know that paying off your student loan and car loan is something that you would like to achieve five years from now, you will be able to adjust your finances accordingly. Also, your financial goals might need a revision every now and then with changes in your financial situation.
5. Retirement Planning- How you manage your finances in your 20s and 30s is what determines how your life would be post retirement. People who are able to retire after 40 are usually the ones who have been managing their finances in a smarter way right from the beginning of their careers. Every person dreams to live a financially comfortable life post retirement which makes it necessary to do an advanced retirement planning. You should be able to save enough amount of money to provide for your basic needs in your 60s without having to depend on anyone else for the same.
6. Keep track of your finances- When I first went to college, I was completely used to the habit of keeping a track of where my money was going. Every penny spent would be taken note of and cross-checked at the end of the month. My Mom used to call me a paranoid for being worried about little expenses but this habit actually helped me learn the art of money management. Keeping a track of your finances can go a long way in stabilizing your financial life by creating a sense of self-awareness with regard to your finances. You must always use an Expense Tracker, an Income Tracker and a Savings Tracker to be fully aware of your finances at all times. Your bills, unplanned expenses and proportion of income that goes into each component of your budget should be tracked by you to help you keep your finances in check.
7. Write off your debt- Debt repayment should be your number one priority when it comes to setting your financial goals. You might, of course, need to make certain small sacrifices in your debt repayment journey but what comes out of it would totally be worth it.
8. Have an Emergency Fund- Life is full of uncertainties and it’s on us to be prepared for anything that life might throw at us. Do you have a plan in place for the unforeseen circumstances that may arise in future? How long can you feed your family if you suddenly happen to lose your job? How much are you prepared if a shutdown were to occur in the company you’re working for? Well, that’s not me being pessimistic. But everyone wants to have themselves and their family secured at any cost which is why having an emergency fund should be one of your topmost priorities. Track your Emergency Fund using an Emergency Fund Tracker and you’ll realise that most of your stress is gone once you have a good amount of financial cushion to guide you through difficult times.
9. Start Investing Today- Investment is one of the best ways to make money from money. Now, investment is the word that is known to scare people due to the associated risk factor but many of us fail to realize that there are multiple investment options that are safer and carry lower risk than stocks. Real Estate, Fixed deposit schemes, high-yield savings account are a few options where your money sits safe. At the same time, it’s always in your best interest to have a complete knowledge of the investments that you are planning to make.
10. Have a Side Hustle to Make Money– Having a side hustle helps you earn some extra bucks while keeping your day job. Although it’s easier said than done but I’m sure it’s not difficult to have a side hustle since all of us possess some unique skills that go underutilized. With the advent of internet, I know people who are easily making a few hundred dollars in their spare time by managing the social media pages for brands. Writers and creatives can easily sell their services online, people with basic educational knowledge can tutor others in their spare time and those with some knowledge of the web can become virtual assistants.
11. Create a savings plan and stick to it- You don’t need to be making thousands of dollars a month to be able to save for your future needs. With a proper savings plan and a bit of motivation to stick to it is all you need to save some money. Every time you get your pay check, set aside a certain amount as your fixed savings and spend the rest of it towards yours expenses. Always list savings as a fixed item in your savings plan and don’t use it for anything else. Keep a record of your expenses and notice where you can save more money.
12. Spend time on your financial education- Basic financial education is a must to be able to manage your finances adequately. You don’t require a professional degree when it comes to acquiring basic financial knowledge. A regular reading habit to keep yourself updated with the happenings in the financial world is all you need to boost your financial literacy.
Personal Finances is a subject that can never be avoided when it comes down to financial security. Invest in yourself to be able to earn more money and discuss your finances with your significant other as it’s always good to have a different opinion on how you should go about handling your finances. No one can know your financial needs better than you and the onus is on you to build up your financial security.