Irrespective of the amount of money that you earn, it’s always wise to plan ahead for the future by making a realistic budget that will allow you to manage your money wisely.
By not planning ahead you increase the possibility of going into debt due to unexpected circumstances or by obtaining too many bills and expenses that you are unable to pay. By always keeping track of where your money goes, you will get a clearer picture of what you can afford. By understanding what you can afford, you can avoid making financial errors that will end up biting you in the butt. It will also advisable for you to create a buffer so that you can safely achieve your long term financial goals.
Below we present some simple but effective steps on how to manage your money effectively and efficiently.
Financial goals
The financial goals represent what you would like to achieve with your money within a certain period of time. Based on your financial goals, setting a specific and achievable timeframe is crucial. If purchasing a car is your main financial obligation for the coming year, it is important to set a time frame that will enable your budget to support this goal.
It’s important to remember that additional expenses that will be incurred when buying a new car. You must think about insurance, petrol expense and unforeseen accidents. All will play a vital role in how much money should be set aside in your bank account to cover your financial obligations.
Know where you spend your money
After having set your goals, the next step is to create a purchasing plan that will provide you with the necessary steps to achieving your goals. You must know how much money you are spending, exactly where it’s going and also how much you owe on a monthly basis.
By doing this you will know what amounts are left at the end of each month and can then easily estimate when you can achieve your goals. The purchasing plan will discourage wasteful expenditure and increase the likelihood of achieving your financial goals.
Evaluate your spending habits
If you find yourself not having any money by the end of the month it is probably time to reconsider how you delegate your funds over the month. Go through all of your expenditures and figure out what is absolutely necessary and what could be eliminated or scaled down. Below are some of the clues of bad spending habits that you want to steer clear of;
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- Using your savings to pay off living expenses; electricity, water, necessities, bills, etc.
- Financing old loans with new loans
- Owing more than your earning
- Impulse buying when you can’t afford them
They would definitely have a negative impact on your bank account, just like an ex-house wife! So remember to always take everything in moderation and plan accordingly for your level of available spending.
CompareHero must remind you to always spend your money wisely. If you take care of your funds, you will be able to enjoy a happy life, be prosperous and continue to grow for future advancement.
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