Ask me to talk about personal finances and related subjects such as savings, budgeting, frugal life, investments and I can do it all day 🙂
It was in October 2020 when I bought my latest iPhone, model 12.
I loved it and I did not hesitate to buy it.
I have read information on upgrades, features and customer reviews on the iPhone 12 and I found it reasonable to spend a large sum of money on a smartphone.
However, this decision must be reflected. The right way to get there was to think about my personal finances and make the right decision according to what my finances could allow me.
Being as impulsive in my purchasing habits led me to develop certain personal finance strategies and to better use 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 home where you have not received a good example on how to manage your finances.
This is why it changed my life to define 10 key strategies that worked for me and that have changed my life.
The meaning of personal finances
Personal finances refer to how you manage, plan and maintain your financial activities.
These include planning your income, expenses, investments and savings.
This also involves managing these factors in order to achieve the short and long -term goals that you set for yourself.
This can be difficult because the majority of people focus on their income and the way they spend them and few of them decide to save or invest.
5 strategies to use for your personal finances
1. Set objectives
How can you plan in advance if you don’t know what you are planning?
Setting objectives is an essential element of your personal finance strategies. It tells you why you spend less or save more. Each financial decision you make will have a meaning according to the objectives you have set for yourself.
These objectives can be divided into two groups: short -term objectives and long -term objectives.
The short -term objectives are those you want to reach in a few months or in a year.
Long -term objectives are those you want to achieve in the near future or in several years.
Setting my goals was essential for me. Even if I was young, I knew what my biggest goals were and I knew how to plan according to them.
I knew I would have unexpected projects along the way, but I felt more proactive towards them.
The main thing I did to achieve my short -term goals was to put aside a sum of saved money that could cover my subsistence costs if I became unemployed.
For my long -term projects, I decided to fix 10 % of my salary and invest it in one way or another.
2. Do not spend more than I earn per month
It was another of my important strategies. I decided never to spend more than a month’s salary in a month.
Of course, this strategy refers to the impulsive purchase that I would make in a month.
For example, if I planned to buy an expensive article, I would plan my finances accordingly.
But I stopped the way I spent huge sums of money, unexpectedly and without planning it, for expensive things.
3. Practice budgeting
Another essential advice to better manage my finances was to specify where the different sums of money would go.
In this way, I would know how much money I have for my hobbies or my outings.
While I was looking on the Internet good advice on personal finances, I came across the 50-30-20 rule of Elizabeth Warren.
According to this rule, I had to devote 50 % of my income to compulsory monthly expenses such as rent, food and various other invoices.
The 30 % of monetary income would be intended for non-compulsory expenses such as my hobbies, my trips and other entertainment activities.
The 20 % would go to my savings that I decided to put aside for short and long -term projects.
4. Having an emergency fund
Creating an amount of money to use for emergency purposes is also an essential strategy.
I think we can all agree that having an important sum of money reserved for unforeseen situations gives us enormous security for the future. We feel more security not only in our finances but in our life in general.
How do we do that?
Well, my initial plan was to collect a sum of money that would cover my livelihood costs for three months in case I lose my job, that I have an accident or that any other similar case would occur.
It happened when I decided to reduce money I would spend on non -compulsory expenses.
It is better to suffer a little in the present to ensure some security for the future, right?
As I reached the amount of money desired, I decided to increase this amount to suffice at six months.
5. Be careful with loans and debts
A wise advice that my mother gave me is to always be careful when I borrow, and if I can avoid it, it is better not to borrow.
If I did not borrow, I should not money and I would be more serene. It was an excellent advice for me.
Personally, I try to better plan my finances to avoid obtaining a loan.
However, there may be cases where you just can’t avoid getting a loan. When you think about it, just read and find out about the loan conditions and any other information that may be useful to you.
Final reflections on personal finances
When I think back at the time when I bought a brand new iPhone without needing it at a very high price, I literally grine about teeth.
Before, I was so bad in the management of my personal finances that it required an immediate change.
I have developed five main strategies that could help me Better control my finances And I will be safer from my expenses. With hindsight, it was the best decision I never made.
This article is an invited article from Edita, Honestaprosconons.com.
Thank you for reading. Let me know if you have any questions/comments below.
