Personal finance usually isn’t something that’s taught at school or considered to be an especially important topic. However, it’s a cause of frustration, anxiety, and worry in a lot of households. Most families don’t have a retirement plan or savings to help them when times get rough. At the same time, statistics show that personal debt is on the rise. Most of these problems could be solved by being careful with spending and sticking to a long-term plan.
Track your spending
Take careful note on how much you spend for a full month. That will give you a good sense of what you have to work with. Be honest with yourself and include impulse purchases and on this list as well. Divide the list into two columns – fixed expenses and discretionary ones. For instance, rent or mortgage will probably stay the same every month, but dining out is something you can control and cut back on if necessary. Update this list on a regular basis (for instance, every couple of months), but don’t let the list control your life, it’s just a tool for getting the finances in order.
Treat your credit card as though it was cash meaning don’t spend more than you have. Some tend to treat credit cards as an unlimited source of money and go way beyond their means, but that just means spending more on interest rates and fees. Try to have low credit utilization, by spending only a portion of your monthly limit every month. Using a credit card this way isn’t only a responsible thing to do in the short term, it’s also a way to establish a good credit score and therefore have the opportunity to secure new loans at low-interest rates.
Getting rid of outdated tech
Outdated technology isn’t just inferior to its modern counterpart it usually costs more as well. For instance, cable TV is now pretty much an outdated mode of entertainment, with all the latest content available online for less money and at your convenience. By connecting all of your mobile devices with your TV set, you can go one step further and create an entertainment center covering all your viewing, listening and gaming needs. It’s also easier to set up than cable – here you can learn how to do it yourself.
Get energy smart
Utility bills seem like one of those things that are completely out of your control and that need to get paid no matter what. This is partly true, at least the second part is, but you can still save a considerable amount by making a few changes in your daily routine. LED light bulbs consume 90 percent less energy than the ordinary incandescent ones. They’re a bit more expensive, but overall savings more than make up for it. A similar effect is accomplished by lowering the temperature of the water heater – the difference is unnoticeable but the electricity bills are smaller.
It’s never too early to start thinking about your savings. As soon as you are debt free start putting some money away just in case. Ideally, you should dedicate 20 percent of your income to savings. This may seem like a lot, but it pays off in the long run. Ten to fifteen percent should go straight into your retirement fund while you might want to be able to withdraw the rest on a moment’s notice. This emergency fund should cover three to nine months of expenses and be used only when there’s an actual emergency. Once you’ve established these to two funds you can start working on holiday or luxury purchase savings.
Living below you means
In general, the best advice about family financing is to live slightly below your means. It’s hard to draw this line because there’s no point in working hard if you don’t spend at least a portion of your income on people and things that you care about. However, being modest and having a long-term plan lets you have peace of mind helps you deal with any future problems.
Managing a family budget is a balancing act of taking care of the big picture and focusing on particular details which comprise it. The only way to do it right is to honestly evaluate both yourself and your needs and to live up to your promises (especially those made to yourself).