Financial management is a touchy issue and has been known to be one of the leading causes of strife among friends, couples and business partners.
While other factors may be at play, most oft than not, lack of information results in wrong financial decisions.
That should not be the case given basic information on financial management is readily available in books and on the internet.
Here are some common but vital tips from financial experts to help you better manage your finances this year.
Have a Budget
Good financial management starts with having a budget. A budget not only helps you objectively plan your life around what you earn but also helps minimize unnecessary expenditure.
A good budget should apportion adequate amounts for basic necessities, savings and leave some cash for lifestyle spending.
As a rule of thumb, 20 percent of your earnings should be set aside for savings and paying off debts, 30 percent for lifestyle spending (entertainment and non-basic necessities) and 50 percent for basic necessities such as food, housing and bills.
Have a Savings Plan
Stocking up for a rainy day is what the wise, including animals, do. Nonetheless, you need to have a realistic savings plan that strikes a balance between your immediate and future needs.
Your savings plan should be informed by how much you earn, how much you need to get by until the next payday and your future plans.
Stay in Your Lane
The biggest financial mistake most of us make is live beyond our means. This is often in a bid to impress peers or fit into certain cliques.
This should explain why many a people are neck-deep in loans yet they have modest jobs or run relatively profitable businesses.
The best financial decision you can make this year is to start living within your means.
Don’t live in an apartment whose monthly rent slices off three-quarters of your monthly salary or hang out at joints where the cost of a bottle of whisky is equivalent to your house rent for 6 months.
Limit Impulsive Shopping
The tendency to shop for unnecessary items is especially real just after payday; when your bank account is smiling at you and the idea of running out of cash is oh so remote.
This is the moment unnecessary items become attractive and seem absolutely necessary in your life but become junk as soon as the excitement of novelty wanes.
This is what the budget is supposed to cushion you against. Stick to your budget and only stray when it is absolutely necessary.
Explore Alternative Shopping Ideas
In other words, think outside the box. For instance, some items will still retain their value even with slight use.
Opt to buy things such as furniture, upholstery and tools in yard sales, auctions and second-hand dealerships instead of sourcing them brand new from stores.
If you’re lucky you’ll find barely used items being sold at half their price original price in the abovementioned places.
PS: This list is by no means exhaustive but only a tiny peak into basics for personal financial management.