Many people are unwilling to make the effort to manage their personal finance, but many more are just uncertain how to do it and although the young often find themselves overwhelmed by the sudden responsibility, it can be an issue at any age.
The main tool that should be employed by anyone who needs to gain financial control is a budget. The very word makes many people wince as they imagine a life where they can no longer buy even the smallest item they want. This is the wrong perception of what a budget truly is A budget is just a way of knowing where your money goes. This does not mean that you must give up your favorite coffee or never visit a movie theater again. A good budget has categories for entertainment as well as utilities, and it will not be so oppressive that it cannot be followed.
Every plan for financial security should include a budgeted amount for savings. If this is something new to you, start with small steps. Take roughly 5% of your income to begin with and place it into a separate savings account each payday. Gradually increase it to 10%, with an ultimate goal of 20%. These amounts may seem like a lot, but they are very achievable with a little experience.
You may have to force yourself to build your savings by using automatic savings options. If you use direct deposit for your paycheck, you can probably have it split into two deposits, one to savings and one to checking. You can also have your bank move money automatically. Treat your savings account as an emergency fund only, and set up a special account for things like vacations. A savings account is not the same thing as one for retirement. It is instead supplementary to a 401(k) plan or IRA.
Married couples need to involve both parties in any major expenditure or decision. Both people need to be involved in budgeting as well Decisions on how much to budget for entertainment or hobbies should be reached by mutual agreement. However, each person should also receive an allowance that he or she can spend for any purpose without having to account to the other for it Do not try to discuss money issues when either party is angry, ill, or stressed, since it can easily turn into an argument.
Keep records of how much you spend and what you buy. You can classify expenses into several categories. One group will consist of bills that are not flexible, such as mortgage or rent payments. Others can be adjusted up or down as needed, and these are expenses such as groceries, entertainment, and clothing. You may be surprised at what you find. For example, a cup of cappuccino at $3 does not seem like much of an expense. But if you buy two a day for thirty days, you are spending $180 a month on it There is nothing wrong with including this in your budget if this is what you really want to do. On the other hand, you might decide that you would rather spend the money on something else. But you cannot make these decisions if you do not have the information.
Before you commit to any type of payment, make sure that you can afford it This may seem like something that is so obvious it should not need to be stated. However, many people make credit card charges without thinking about how they will eventually make the payment. Too often, they only think of how much is open on the card for charges.
It is certainly easier to buy what you like, when you like. It takes conscious effort to control your personal finance. However, you have much to gain, and not all of it is financial. Fewer arguments with your spouse and a sense of accomplishment are two good reasons to take charge of your spending. But perhaps the greatest reward is one that money cannot buy, and that is your peace of mind.