Money Management 101: 9 Tips for Taking Control of Your Personal Finances

Want to know the secret to managing your money better? It’s about taking control of your finances, instead of letting them control you. In fact, the way you take care of your money will affect many aspects of your life, so you need to take control of your finances to ensure your own success and personal freedom. Whether you have little money or a lot, managing your money effectively will pay off in the long run. You’ll be able to stay on top of your bills and debts, and potentially save thousands of dollars a year.

From setting your financial goals to saving for retirement, these tips and tricks will be extremely beneficial for managing your personal finances and can help you live a comfortable and prosperous life.

1. Set your financial goals

What do you want to do with your life and your money? You might want to travel the world, retire early, get out of debt, save more money, or buy a home and start a family. When setting your financial goals, be sure to write them down and list them in the order you want to achieve them. Choosing a clear timeframe will ensure you stay focused and driven towards the end result. It also helps to write down the amount of money that you want to save or how much debt you want to pay off.

Start by setting long-term goals (e.g.; buying a home) to help you focus on your short-term goals (e.g.; saving for a deposit). You can also create a financial vision board to help you to keep motivated with your financial goals.

2. Create a budget and stick to it

Creating a budget is simple. Write down your monthly income (e.g.; wages and other forms of income) and deduct all expenses (e.g.; bills, groceries and entertainment) then see if you have money left over. If there is too little to put towards your financial goals, then you’ll need to see where you can cut back to save more money. You could spend less on non-essential expenses such as eating out or going to movies, or you could buy fewer clothes and reduce your energy usage. Don’t forget to budget for your financial goals.

You should spend less than you earn so you can save and be prepared for emergencies or major life changes. Remember, the budget is a useful tool so refer back to this budget weekly to stay on track and achieve your goals.

3. Have an emergency fund

It is important to put away money in an emergency fund every month for unexpected expenses, such as medical bills, redundancy, sickness or car repairs. An emergency fund can also be used for other expenses you may not have previously thought about such as covering bills whilst you are away on holiday.

You could put the money in a high-interest online savings account or in a term deposit account at a different bank, so that you cannot easily transfer it to your everyday transaction account. This way, you’ll be able to watch your money grow. A good guideline is to have at least six months’ worth of savings in your emergency fund.

4. Shop smart

If you are thinking of buying the latest gadget or fashion item, consider the number of times you will use it or wear it. If you are shopping for clothes, a good tip is to go by yourself. This way there will be no one around to tell you to buy a piece of clothing just because it looks good on you. You will be able to treat shopping seriously without impulse.

You can also consider spending your money on experiences rather than things, like a picnic in the park or a concert. This will give you more happiness for your buck. Most importantly, you should buy less of what you want and more of what you need. Avoid overspending – it’s important to save money.

5. Pay off your debt and get out of debt

Having debt can prevent you from reaching your financial goals. So, if you have loans or credit cards, pay off the balance due in full every month. You can either pay off the debt with the highest interest rate first or pay off the smaller debts, which can motivate you to keep paying off your larger debts. For credit cards, don’t spend more than your monthly credit limit, and once you are out of debt, cut them up and only pay using cash. You won’t be tempted to spend what you don’t have.

6. Take out insurance

You can purchase insurance policies which include income protection insurance for when you can’t work due to illness or injury, health insurance for when you get into an accident and need to pay expensive medical bills, and home and contents insurance for when your things get stolen or your home gets damaged in a fire. With insurance, you don’t have to pay thousands of dollars out of your own pocket, and you’ll be able to afford services such as health treatment when you need them.

Other insurance policies available in the market are life insurance, car insurance, disability insurance, and long-term care insurance. Make sure to compare insurance policies, rates, benefits, and premiums from different insurance providers to ensure you are getting the best deal.

7. Boost your income

Increasing your income means you can save more money, allowing you to reach your financial goals faster. For example, you can ask your employer to give you a pay raise, which they may be more than happy to do if you tell them why you’re a valuable asset to the company. When negotiating a salary with a potential employer, never give away your current pay from the start. Have them name the figure first so you can push it higher.

Other ways to boost your income are getting a second job, holding a garage sale and selling things that you don’t use or need anymore, starting a business, or studying again to get a better-paying job.

8. Invest your money

You can also increase the money you earn by investing it. When you invest your money, it can grow while you sleep, and when invested properly, you’ll earn more money over time. Instead of just putting all your money in an online savings account, you can also invest your money in the stock market or in the property market. This could give you a high return on your investment, depending on the value of the shares you’ve purchased.

Create an investment plan based on your goals and timeframes, and consider your risk tolerance. If you want to save on fees, choose investments such as low-cost index funds. And make sure to look at your portfolio every year to ensure that your investment allocations still align with your investing goals. You can also speak to a financial planner to help you make sound investment decisions.

9. Save for retirement

You should save for retirement as soon as you start earning income. Because of compound interest, the sooner you start saving, the more money you’ll have to retire on. You can either put more money into your savings account specifically for retirement or you can increase your super contributions. To determine how much money you need to save, look at your current and future expenses and when you want to retire.

Only cash out your super when you reach your retirement age and when you have all the money you need. This way you’ll avoid a heavy penalty and tax bill for early withdrawal, and you’ll be able to live comfortably in retirement.

Keeping your personal finances on track

By following these tips and tricks, it’ll be easy to keep your personal finances on track. But if you don’t have the money right now to pay for unexpected medical bills or car repairs, you can take out a personal loan. If you’re struggling with debt, you can also use the loan for debt consolidation purposes to reduce monthly repayment costs.