Personal Finance and Budgeting Tips

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A Step-by-Step Guide to Managing Your Personal Finances

Managing your personal finances can be difficult, no matter what phase of life you’re in. At times, it may seem practically impossible to make ends meet. Whether you’re a recent college graduate, just starting a family or ready for retirement, you may be overwhelmed by the idea of managing your money. This step-by-step budgeting guide to can help you manage your personal finances as you move toward the next chapter of your life. For expert financial advice, please consult with a licensed financial advisor.

Step #1: Start Saving for Retirement

Whether retirement is just around the corner or seems too far away to even think about, start saving for it. The sooner you start putting money away for your retirement, the easier it will be to transition smoothly when the time comes. Find out if your employer matches 401(k) contributions and take advantage of all workplace savings plans that are available. Step one in personal finance management is saving for the days you’ll no longer be able to or want to work.

Step #2: Manage Your Debt Wisely

If you have credit card debt or outstanding student loans, pay them off as soon as possible. Work with a loan counselor to create a feasible loan repayment plan, and make regular monthly payments. Pay off credit card debt one card at a time. Usually, it is best to pay off the card with the lowest credit limit or highest interest rate first. Exceeding your credit limit by accident can add additional fees and damage your credit score, while high interest rates can make it difficult to pay down you debt. Try limiting your use of credit cards for large, single purchases or regular manageable expenses so you don’t have to worry about high interest rates and fees that come with not making payments in full and on time.

Step #3: Set Savings Goals

Articulating your goals can actually help you move toward them. Think about how much you want to save and what exactly you’re saving for. Every pay period, save money toward your goals, whether you plan to make a purchase or take a vacation. By saving large amounts sooner, you can accrue interest that will help you reach your goals even faster.

Step #4: Get Help from Financial Advisors

Seeking help from experienced financial advisors can help you plan, budget for and reach your financial goals. Financial advisors help you establish realistic and manageable investment goals and priorities. A good advisor will also help manage any tendencies you have to overspend or under-save, keeping your budget in check and on course. Financial advisors are there to help you create, monitor, adjust and meet your financial goals throughout your lifetime.

Step #5: Make a Budget and Track Spending

If you have trouble organizing your finances, look to technology to help. Apps like Mint help you keep track of how and where you spend money each month so you can create a realistic budget and stick to it. By tracking your spending and seeing the trends displayed in easily understood charts and graphs, you will be more likely to make responsible financial decisions moving forward. You can even use financial apps to budget for future expenses like purchasing a home or going on the trip of a lifetime.

A Sample Budget to Get You Started

Divide your monthly payments into four categories: fixed costs, investments, savings, and guilt-free spending.

  • Fixed costs generally comprise 50-60% of your budget. This category covers monthly expenses, such as rent, gas, bills and groceries. These are expenses you can expect and prepare for.
  • Investments should make up 10% of your monthly costs and grow over time. If you have a 401(k), mutual fund account or other investments, you can count them in this category.
  • Savings for both short- and long-term goals should take at least 5-10% of each paycheck. This category includes money for vacations, gifts, big purchases and emergencies. If you can increase the money applied to this category, do so.
  • Guilt-free spending can make up 20-35% of your budget and is exactly what it sounds like. If you’re putting money toward the other three categories in this sample budget, you should be able to eat out, drink or splurge on a few luxuries without feeling guilty about your budget.