June 2024

Budgeting your personal finances and building wealth

Budgeting your personal finances and building wealth

You do not have to be an expert in money , in order to be in control of your personal finances. With a little planning and discipline, you can live on what you make while putting some aside to grow your net worth. The key issue is to live within your means. Set up a personal or family budget. Here are some tips for financial success.

1.You should try to pay off your debts as fast as possible, and do not apply for any new debt either. It sounds relatively simple, however, most of us have difficulty with it. Whittle down your debt gradually, and never incur new debt. A consistent plan of attack is the best way to reduce your debt and improve your financial situation. It makes sense to eliminate the small debts first because then you will feel you have achieved a milestone, then with the money you were paying that debt off, use to pay the next size debt until you will find you will gradually have every thing paid.

2.Some people recommend that you should consolidate debt, however the disadvantage of this is that it gives you a false sense of security, and extends the length of your debt, when you feel the pain each day and week of debt, then you will be motivated more to pull out the stops to get rid of it.

3.Take advantage of online banking alert services that are offered by your bank. If something happens in your account you will be notified in an email or through a text. Alerts that let you know of a low balance or a large withdrawal will help you to avoid fees from overdrafts or fraud.

4.If you work for yourself, working from home is one avenue worth investigating when you want to save money. The cost of traveling to work can be expensive. Gas and meal expenses are two of the main expenses that you will incur when driving to work and working away.

5.Have a savings plan. When you get all of your finances together, it is not too late to start out saving and setting up a budget. You will benefit from any investment no matter what age you start than if you never did, work out your risk appetite and set your savings. The earlier that you start, the better, but it is never too late to begin.

6.Avoid making bad choices by reducing alcohol consumption. When you go out, just drink water or juice so you do not make bad choices about money when you are drinking. Under the influence of alcohol our minds are warped and dull towards spending money. Also when having water or juice it is much cheaper as well.

7.Only invest money in risky projects unless you can afford to lose it. For example, you could allow your profits to be used in Forex trading or stock market. However, it is also important to use this concept in moderation. Once you figure out how to make trades, you will also figure out the proper point at which to remove your money from the mix. Do not be greedy.

8.It is best to carry some cash or a debit card with you for small purchases. Don’t rely on credit card use for all of your purchases. The main reason is that when you have cash, it hurts more to spend it than on a credit card that you can ignore for 30-40 days. Also new fees and policies can make credit cards cost more to use, so learn to carry cash for small purchases and consider getting a debit card instead. Now saying that as a general rule I actually put everything on my credit card for 3 reasons. Firstly I am disciplined in that I do spend what I can only afford and make sure I pay my cards off at the end of each statement date. Secondly I get 30-40 days interest free credit. Thirdly I get 3% back on my Aqua credit card on all spend so I actually get money back. This is only good if you can resist the temptation to extend credit otherwise you pay high APR interest rates and fees.

9.Most new products already come with a 90 day or one year warranty, and if your item is going to mess-up, it probably will within that time frame. Extended warranties are great for businesses, but they are not always great for the customer. Check what will work out best for your item. Barclaycard sometimes offers a free extended warranty period when you buy goods with their cards.

10.An essential part in taking care of your personal finances is to get a good health and life insurance policy. Illnesses and death can spring up suddenly any time. Because of this, it’s important to have a good insurance policy. In the UK we have the National Health, but in other countries you have to pay, doctor and hospital bills can quickly add up. If you don’t have good insurance, you could be left drowning in debt. Do not travel without good travel insurance. Normally the best type of policy for life insurance is term insurance, it will help loved ones in the event of a death to just tie them over for a while.

11.Make sure you have good car insurance and breakdown cover, I have seen people without breakdown cover paying more to be recovered and repaired than the cost of the policy.

12.If you are thinking about moving to a new location for employment, remember that an increase in pay may just mean higher living expenses. Look into the cost of living when you are considering a job that will require a move to a new place. The key thing to consider is disposable income not net pay.

13.Balance your accounts every day or week online if you don’t want to do it the old-fashioned way. There are many programs and websites that take a lot of the drudgery and repetition out of doing it by hand. In addition, these programs will add up interest, cash flows and give you some advice about budgeting. Microsoft Money and even Excel spread sheets are good tools.

14.Some debt is actually good for your credit score. A mortgage on real estate that will increase in value may one day turn into profit is a great investment that creates good debt. Your home is the best investment and you should try to make extra payments. With buy to let investments in real estate of any type can yield good returns for the money in the form of appreciation, as well as a tax deduction for interest paid on loans used for purchasing the property. Educational debt needs to be considered carefully. There are many loans out there for students that have lower interest rates that don’t have to be reimbursed until graduation or until you get a job. Once in debt it is a good policy to pay off as much as we can and as soon as we can.

15.Instead of scrambling to get all your tax documents together you should keep your files in order throughout the year. By having all your finance-related paperwork files together, you can quickly and easily find what you need at tax time. If you are like me every January I am sweating to find all my bits of paperwork to sort my tax return wasting hours sometimes. So be organised.

16.Instead of charging things to a card that’s almost maxed out, use multiple credit cards. When you’re paying towards two separate payments, your interest payments won’t be as high as they would if you were paying off a credit card that’s been maxed out. Keeping lower balances on two cards, rather than maxing out one card, protects your credit scores and can even improve your credit history if you keep both cards paid on time. Better still be sure to pay all your cards off at the end of the month and pay on a live within your means basis.

17.Each individual should know the value of their possessions. It will help a person decide whether it is better to throw something out, or attempt to sell it when they decide to get rid of something. It’s also important to check on the valuation on items you might not have bought that you are considering getting rid of. Sometimes an ugly vase may be a collectible to someone else. A quick Internet search can give you some information about the value of certain items. Take a look in the loft and see what treasures are up there.

As has been shown in this article, it is quite possible for someone to live comfortably within their means, increase their wealth and have healthy finances. A little common sense and following some of the tips above will help you live within a budget, lower your debt, and build wealth. You can be the master of your personal finances!


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