How long have you not taken vacations due to lack of money? Do you count the seconds and each peso, until the next payment arrives? Do the costs of tuition, food and services leave you little for fun? Don’t worry, it’s happened to all of us and it’s not something that a few adjustments to your personal finances can’t fix. This time we will give you some recommendations that will help you have a better relationship with money.
Let’s start by defining what personal finance is. When people talk about personal finances, they generally refer to the management of economic resources they own, with a better vision of the future in their mind.
The aspects like financial risks, the goals, the savings instruments and the capitalization are considered as the available tools to methodize the money.
According to this, personal finances are in general, taken as a professional subject, because personal expenses are treated as something of least importance; but, in reality, it is an important area of our lives that must be treated with a minimum of substantive criteria. Otherwise, it could lead to financial chaos in daily lives, turning into disaster.
It could even prevent us from reaching goals and losing everything in the face of any emergency, no matter how small.
Take note of these personal finance tips that will help you with expenses at home and make ends meet without having to take extreme measures.
1. Start your financial education
Read some books or take online courses, the important thing is to learn about the subject. This will help you understand all the concepts, products and services related to personal finance and make informed decisions.
One of the key readings for financial education is the book Rich Dad Poor Dad by Robert T. Kiyosaki. In it, you will learn, from two different perspectives, about the different types of income, taxes, investments, financial challenges and entrepreneurship.
On the other hand, Little Capitalist Pig by Sofía Macías has a more didactic style with which you can begin to implement specific changes in your lifestyle that will give you good financial solutions in the long term. What’s more,
2. Identify your income and expenses
Take a pencil and paper and start making accounts. First, make a list of all your monthly expenses and divide them into fixed and variable. But what does each refer to? Fixed expenses are those we make as part of our daily lives: rent, food and services such as internet, water and electricity.
Variable expenses are those that are more related to your lifestyle, for example, going out to restaurants, trips, coffee, visits to the movies, amusement parks or even those purchases that you know you don’t need but want. In this second list is where you will find expenses that you can eliminate more easily.
3. Make friends with budgets
Having control of your personal finances does not mean giving up everything, that is what budgets are for. Take into account what your monthly income is and subtract your fixed expenses from this, then set aside a percentage for savings and what is left over will be used for all the variable expenses that you do not want to give up.
The best known way to split income is with the 50/20/30 rule. In this plan you must allocate 50% of your salary to cover your fixed expenses (rent, food and services), 30% to your variable or personal expenses and 20% for savings.
Of course, this table can be adjusted according to your needs, but it will help you to have a better view of how much you should be saving and how much you can spend in your lifestyle.
4. Avoid impulse purchases
Try to respect your budget. Analyze each purchase before making it, the offers may seem like great opportunities, but many times we end up buying things that we do not need.
For example, when we go to the supermarket and find a product that we do not usually use at home, with a 2×1, it is almost impossible for us to ignore it. But in the end you will only be carrying 2 items that you didn’t plan to buy in the first place.
Special discount days such as Good End or Hot Sale have a similar effect. We started looking at price comparisons and thought we’d take advantage of the discounts, even if you weren’t planning on getting a new computer or massage machine. This is different when you have already considered the purchase you want to make or it is something you require for your home, for example.
5. Create an emergency fund
We never know what can happen and nothing destabilizes more than an emergency. Anticipate unexpected expenses and create a fund to help you face these situations without neglecting the payments of your fixed expenses.
Once you have made your balance, you should implement an action plan to increase them. Investing money is a good way to make your capital profitable and make your savings more effective , since this way it does not lose its value over time. Stock market , mutual fund and property investment is the most popular investment plan in the present time .
First rule of investing is to educate yourself before investing your money anywhere with a personal finance course or research the tools available in that field. If you are Looking to invest in property use a house price calculator that can tell you the future value of the property you are looking to purchase.
Experts advise having in this fund the equivalent of at least 3 months of our fixed expenses, although the best would be 6 months, so that in an emergency you have enough to pay school fees, rent, electricity, food, etc. It is not necessary that you stress trying to collect this amount from one month to another, you can save little by little for it.
For example, if you allocate 20% of your salary for savings, for some time divide this savings in half and allocate one part for the emergency fund and the other for your savings in general.
Keeping track of your personal finances will help you improve your relationship with money, recognize what you really need, and let go of stress. Are you ready to start applying them in 2022?
Name – Jonathan Veers
Jonathan is the founder of SPV Mortgages. He can help you find and secure the best limited company mortgage options to push your property investment dreams forward. As specialist mortgage brokers with over 10 years of industry knowledge, he has helped experienced landlords and first-time investors across the country; saving you time and money in tracking down the best rates.