Do you ever feel as though your finances are completely out of your control? With multiple automatic deductions going off your account at the end of the month it can seem as though you have little say as to where your hard-earned income goes. Personal loans credit card payments and other debt quickly eat into your monthly salary. Furthermore, how much you earn isn’t necessarily the problem: the person who earns R60,000 a month and spends R70,000 will be more financially stressed than the person who earns R20,000 and spends R10,000.
Ultimately, what it all comes down to is the relationship between money in and money out. Here are five ways you can take back control of your finances...
1. Figure out where your money is going
You can’t manage your personal loans and wealth if you can’t measure them. Look back at three or even six months’ worth of bank statements and account for every single deduction and expenditure. Develop a comprehensive picture of where your money is going and what your spending habits look like.
2. Cut back
Going out to eat won’t leave you financially crippled, but if you add up those costs over the course of a month you’ll get a real picture of just how much money you are spending unnecessarily. The same applies for recreation, shopping, and other treats and non-essentials. Scrutinize your spending habits to see where you can cut back and, instead of taking out personal loans to afford your lifestyle, start paying those loans back.
Having trouble budgeting? Read How to Create a Budget and Stick to it!
3. Set those priorities
Cutting back will bring you closer to healthy personal finances, but it’s not necessarily the entire solution. Getting out of debt and building wealth is a journey so it’s at this juncture that you need to plot your path forward. What are your priorities? What debts are most important? While you shouldn’t neglect your car or home payments over unsecured debt like credit cards and personal loans, you should try to pay those off as promptly as possible because they are likely costing you dearly.
4. Pay yourself first
Once you’ve covered your expenses, paid off those personal loans and cut back on non-essentials, set some money aside each month for expenses such as emergencies, holidays, and leaner months. Building a savings fund will prevent you from going into debt at the first instance of trouble and should serve as a cushion should you ever encounter financial difficulty. “Paying yourself” by building a emergency fund is your way of protecting yourself financially and making provision for a good life.
5. Now, treat yourself
If you never allow yourself the occasional indulgence, you’ll probably end up spending recklessly and having to take out a personal loan to make it to the end of the month. By budgeting for those necessary expenses, putting money aside for savings and retirement, and tracking your monthly expenditure, you’ll know exactly how much money you have left over and it’s this allowance you should treat yourself with. Life is for living after all, but once you’ve gone through this money, it’s over until next month.
For more tips, tools, and tricks, check out these fabulous Free Financial Literacy Resources.
More from our blog:
