Most of us put lots of effective plans in place but still fail to manage the personal finance. And the biggest cause of this problem is not their income but unable to manage their expenses. However there is not any specific guidelines which help you to manage your expenses. But if you do it in a right way then it would definitely help to manage your personal finance to a certain extent.
Today we are going to discuss some of the key factors which are very important from the perspective to make a co-ordination between your income and expenses. And if you can make a balance between these two points half of your job is done. You need to prioritize your expenses on based of your income so that you can not only make most of it. But would also not fall in the vicious circle of debt which can lead you to bankruptcy and some other big problems.
A simple step by step guide which would help you to manage your personal finance
1. Set up a goal and create a plan
First you need to setup a goal what you want to achieve with money. Are you planning to retire early and want to travel the world? Or do you want set up business so that you can even make money after the retirement. So once you have a goal then you can put an effective plan for your personal finance. Because if you want to retire early you need to investment some money in retire plans. Or if you are planning to setup a business then you should have some savings. So goal can affect your personal budget in many ways.
2. Make a co-ordination between your income and expenses
This equation works very normally and it is not a rocket science to understand. If you are expenses are higher than your income then you are falling in the trap of debt. Usually we all know but still some time we can’t stop our-self in falling from debt. And the primary reasons is not prioritizing our needs. We have $500 monthly budget on groceries and we exceeded $100 jut because we couldn’t resist to buy something which was not a part of our plan. Now this type planning is the main cause of our failure. But some times situation could be different lets take an example that you have medical policy but it does not contain certain type of disease for which you are looking the treatment. This type of emergency requirement can’t not be avoided but in order to make an effective plan you should have some saving to deal this type of emergency. In other words we can say we all should have an emergency fund in our plans.
3. Make a monthly reconciliation
Make sure you do a monthly reconciliation so that you can find out what have you achieved with your planning. Have you achieved your goal? is something missing in your planning or may be need correction?. Doing a reconciliation is the perfect way to achieve the goal. Other wise at the end of year you will find that despite so much planning and goal we still failed to achieve the result.
4. Always stick to your budget
We can understand there are lots of things we want to buy but we have to understand what is necessary and what could be parked for later. If we can control on our needs and requirements then making plans and goals all are completely waste. Eventually you have certain amount in your hands now the only things we are trying to do is to get most of out of it. And this can’t be possible we if have no control on our needs. So it is really important to avoid buying which is not a part of your plan until it is not necessary.