Money management is important for adults of any age. Starting good habits early, such as setting a budget, saving for major purchases and using your credit wisely can help set you up for a good financial path later in life. Building credit can help you secure a mortgage or car loan when you need it the most.
While some people are easily able to handle their personal finances, it can be a bit more difficult for others. Finances are often a problem for college students. Student loans, tuition, room and board, books, entertainment, and other expenses often consume a large portion of their disposable income. They also come across sales pitches for various credit cards that offer low annual percentage rates, which also have to be used responsibly.
Here are seven ways to manage your personal finances properly:
1. Know your expenses.
Many people who spend more than they make usually don’t have a good grip on their monthly expenses. If things are getting out of control, that’s a good time to sit down and review your monthly bills. Compare them with your monthly income to see how much you need to make every month to be able to cover necessities.
2. Consolidate any debt.
If you have a credit card, student loan or other large debt looming over you, you may want to consider consolidating those bills. There are companies and services that can help you combine those bills into one regular monthly payment. Make monthly payments, but don’t forget a month or skip a month, as interest and finance charges can quickly make you pay more in the long run.
3. Cut back on unnecessary expenses.
Once you’ve reviewed your monthly expenses, you should look at any items that are unnecessary. Movies, concert tickets, cable TV and other luxuries may have to be on the back burner for a while. Cutting costs now can also help you save more for larger purchases like a new car or the down payment for a home later on.
4. Invest wisely.
Investing in the stock market is a good way to make extra money and accumulate additional funds for the future. Just make sure that you invest wisely. If you’re new to the market, you can read what is the dow today and other blogs and news sites for some helpful investment advice. If a particular security isn’t doing well or the company is in the news for the wrong reasons, it may be time to sell and move on to another security with a good reputation and track record. Staying on top of market trends and fluctuations can help your money work for you.
5. Review your credit report.
The better your credit score is, the easier it usually is to secure loans for mortgages, a new vehicle, and home improvements, for example. Keep your credit card balances low and pay more than the suggested minimum every month to build your credit. If you can pay your credit card balances off every month, that’s even better. Request a credit report at least once a review so that you understand your credit score and can question any discrepancies that may appear.
6. Establish an emergency fund.
Even though you’ll probably never use it, having an emergency fund is helpful for things like storm damage to your home, car accidents or unexpected medical bills. You can even set up a separate account for emergency funds if you’d like. You should only withdraw funds from this account when it’s absolutely necessary.
7. Set aside money for retirement.
Many of us want to enjoy our retirement. In order to do that, we have to start saving for it as soon as possible. It’s a good idea to set aside a fraction of your take-home income for retirement every month, depending on what your needs are and when you want to retire. Some employers fully vest employees in their retirement plans after a certain number of years at the company.
Managing your finances can seem daunting, but it’s really not that bad. It just takes a little effort and dedication each and every month. If you’re not sure where to start, there are financial advisers, money managers, debts counselors and other professionals that can help get you started. Taking control of your finances gives you one less thing to worry about. You can concentrate on building funds for a happier and more successful future.