If you are just starting off with your first pay check, rent, bills and other financial obligations, you’ll want to be more responsible with your cashflow. This will not only improve your credit score for possible loans in the future, but help you prepare better for post-retirement life.
Not everybody is good with money. But financial responsibility can be learned. In this post, we’ll be discussing a few ways to help you manage your money better.
- Set up a budget
Setting up a budget is the first step to taking control of your finances. Sure, it may require some work, but it is a smart way to get an overview of money coming in and money going out. Simply put, a budget is an organised table of your cashflow; how you earn versus how you spend. You can also use a budget to set up limits for your expenditure.
With a good budget, you are:
- More likely to have a good credit score
- More likely to qualify for a loan or mortgage
- Less likely to be in debt
- Less likely to be caught unawares by unexpected costs
- Getting everybody involved
If you live in a household with other occupants, you should organise how the expenses are managed. Discuss the energy usage, each member’s contribution, total household budget and so on. You will also want to set up a plan that everybody can abide by.
Calculate the total spending more from the income and agree to the role each person will play in the money management. A well-managed household is a financially comfortable one.
- Reducing your household bills and mortgage
Household bills make up asignificant part of our spending. If we adopt certain responsible behaviours, we can control the amount we spend. There are technological applications that help keep people a tab on their money. Online financial apps thismake it easy because they are designed to be both efficient and user-friendly.
The app helps you monitor your savings each time you earn by reminding you to put aside a percentage of your income. It also helps people make quick transfers between accounts, and when to pay up your monthly outstanding.
- Pay off loans and credit cards
If you owe money on credit cards or have loans, it is logical to pay of the debts with the highest interest rates first. Some examples are:
- Credit cards
- Store cards which usually charge high interest rates
- Bank personal loans which usually charge a lower interest rate than store cards or credit cards
Be careful to avoid go against the term and conditions. So, if you intend to pay down on another debt, pay at least the monthly required payments on any loan agreements and the minimum (at least) on any credit cards.
- Set a savings goal
Many people find it difficult to save. But setting a savings goal can motivate you to achieve this. How much should you save from your income? The 50/30/20 rule is always a good standard. Start with emergency funds, what else do you need? A retirement savings account, deposit for a mortgage or a new car? When you specify your goal, it becomes a lot easier.
These are just a few tips, but they can help you start off on the right step to becoming more financially responsible.