Ask me to talk about Personal Finance and its related topics such as savings, budgeting, frugal living, investments and I can do it all day long 🙂
It was October of 2020 when I bought my latest iPhone which is the 12 model.
I loved it and did not think twice about buying it.
I read about the upgrades, features and customer reviews of the iPhone 12 and I found it reasonable to spend a large amount of money on a smartphone.
However, this decision has to be thought about. The right way to had this done was to think about my personal finances and to make the right decision based on what my finances could afford.
Being this impulsive in my buying habits caused me to work through some personal finance strategies and make better use of my money.
It is a fact that it becomes difficult to manage our finances as we reach adulthood. It becomes even more difficult if you grew up in a household where you did not get a good example of how to handle your finances.
This is why it was life-changing for me to define 10 key strategies that worked for me and changed my life.
The Meaning Of Personal Finance
Personal finance refers to the way you manage, plan, and maintain your financial activities.
These include planning your income, spending, investments, and savings.
It also involves managing these factors in order to achieve short-term and long-term goals that you have set for yourself.
This might be difficult since the majority of people focus on the income and the way they spend it and not a lot of them decide to save some or invest some.
5 Strategies to use for your Personal Finance
1. Setting goals
How can you plan ahead if you do not know what you are planning for?
Setting goals is an essential part of your personal finance strategies. It tells you why you are spending less or saving more. Every financial decision you make will get meaning based on the goals you set.
These goals can be divided into two groups: short-term and long-term goals.
Short-term goals are those that you want to achieve within months from now or within one year.
Long-term goals are those that you want to achieve in the near future or within several years.
Setting my goals was essential for me. Although I was young, I knew what my biggest goals were and I knew how to plan according to those.
I knew that I would have unexpected plans along the way but I felt more proactive with regards to these.
The main thing that I did for my short-term goals was to set aside a saved amount of money that could cover my living expenses if I became unemployed.
For my long-term plans, I decided to set 10% of my salary and to invest it in some way.
2. Not Spending more than what I earn per month
This was another important strategy of mine. I decided to never spend more than a month’s salary in one month.
Of course, this strategy refers to the impulsive buying I would do in a month.
For example, If I were planning to purchase an expensive item, then I would plan my finances accordingly.
But I stopped the way I would unexpectedly and without planning it, would spend huge amounts of money on expensive things.
3. Practice Budgeting
Another essential tip to better handle my finances was to specify where different amounts of money would go.
This way I would know how much money I had for my hobbies or going out.
When I was browsing on the internet for good personal finance tips, I stumbled upon the rule of 50-30-20 by Elizabeth Warren.
According to this rule, I had to spend 50% of my income on the mandatory monthly expenses such as rent, food, and various other bills.
The 30% of money income would go to the non-mandatory expenses such as my hobbies, travelling, and other entertaining activities.
The 20% would go to my savings which I decided to set aside for short- and long-term plans.
4. Having an Emergency Fund
Creating an amount of money to be used for emergency purposes is an essential strategy as well.
I think we can all agree that having a significant amount of money set aside for unexpected situations gives us a huge safety for the future. We feel more secure not only in our finances but in our life overall.
How do we do this?
Well, my initial plan was to collect an amount of money that would cover my living expenses for three months in case I would lose my job, I would get an accident or any other similar case would happen.
This came together by me deciding to cut back on the money I would spend on non-mandatory expenses.
It is better to suffer a bit in the present to ensure some safety for the future, right?
As I was reaching the desired amount of money, I decided to increase that amount to be enough for six months.
5. Be careful with loans and debts
A wise piece of advice I got from my mother is to always be careful when I borrow, and if I can avoid it, it is better to not borrow.
If I do not borrow, I would not owe any money to anyone and I would be calmer. This was great advice for me.
Personally, I try to better plan my finances to avoid ever getting a loan.
However, there might be cases when you simply cannot avoid getting a loan. When you are considering it, just read and ask about the terms of the loan and any other information that might be useful for you.
Final Thoughts On Personal Finance
When I think back of the time, I bought a brand new iPhone without needing it at a very high price, I literally cringe.
I used to be so bad at managing my personal finances that it required immediate change.
I worked out five main strategies that would help me better control my finances and be more secure in my spending. Looking back now, it was the best decision I’ve ever made.
This article is a guest post from Edita, honestproscons.com.
Thanks for reading. Let me know if any questions/comments below.
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Sagar Sridhar is a personal finance blogger from Canada. His genuine passion for personal finance coupled with his unique style of writing is what stands out. Professionally, he is a computer engineer, agile certified and has a master’s degree in Project Management. His writing has been featured or quoted in the leading Canadian publications such as Credit Canada and many other personal finance publications. While he is juggling between his day job and blogging, he is the main author on this blog and has miles to go before making the final pit stop.