Actionable personal finance advices that won’t lead you astray
Managing one’s personal finances appears a daunting task for most of us but little do we realize that there are simple actions and practical ways in which we can integrate a strong management system into our existing lifestyles to achieve the ultimate result – a strong financial foundation.
Here is really practical homespun wisdom that will be of immense use to you in managing your money:
Never obsess over material possessions
Most people undergo a continuous cycle of wish fulfillment where they scurry hither and thither to accumulate possessions, be it homes or cars and a thousand other trinkets that they feel are essential to their continued happiness. The problem mainly lies in the confusion associated with the words “wants” and “needs”. We find it difficult to reconcile both in a practical way that doesn’t tax money resources. As a wise man once said, we are immersing ourselves in a perpetual cycle of accumulating possessions that we don’t really require, constantly testing and stretching money resources we don’t really have, and we are doing all this merely to keep up with the joneses.
The problem with succumbing to the allure of material possessions is that they cost an awful lot of money. Making huge demands on our earnings can compromise the health of our finances in the long run. Often we tend to take on more debt than we can reasonably afford just for accumulating possessions and for maintaining a lifestyle that doesn’t match our income. This is a one way ticket to financial penury, and the sooner we realize this, the better we will be.
True financial freedom is living with frugality and a sense of purpose, well within your income. If you earn a salary of $65,000, what compels you to spend the entire tranche in one month? The ideal solution is to place curbs on your wants and to strive to ignore what other people say, feel or think when it comes to maintaining your lifestyle. Remember that the goal of life is to stay physically healthy, become mentally fitter, and to feel emotionally stronger so that we can effectively tackle the full spectrum of roles and responsibilities that come our way. Simplicity, frugality and sensibility ought to dominate our living and loving and we will make great headway in keeping our finances healthy too.
Initiate emergency funding measures without delay
An emergency fund can accomplish a lot in stabilizing our finances. There are plenty of ways to go about it and wise souls recommend a minimum of six months emergency funding that can comfortably take care of most if not all domestic expenses. When we speak of expenses ensure that the most demanding elements such as rent, taxes, and utilities are included before widening the funding to take care of miscellaneous expenses. To make a good beginning think humble and start with $1,000. That way you get over the toughest hurdle which is creating a stable foundation for your long term goal. This simple measure will help you avoid credit card spending.
If you have piles of unused stuff accumulating around the home, conduct a garage sale and get spare cash that can be ploughed into the fund. The fund will guarantee peace of mind when it comes to tackling full blown emergencies and unbudgeted expenditure.
Don’t get carried away by the consumerist wave
We unfortunately live in a society that is growing increasingly consumerist and everything is available for a price from homes and electronic goods to high tech gadgets that lenders tempt you to splurge on through unnecessary loans. Never fall into a debt trap accumulating assets that diminish your savings beyond repair, and stick to basic loans that leave you sufficient margin to take care of expenses after servicing the loan.
Adopt a simple philosophy where you live a practical life shorn of luxuries that may deplete your money unnecessarily. Don’t be in a tearing hurry to acquire assets you can substitute with commonplace conveniences. If a home is unaffordable settle for a rental; if outdoor dining is avoidable, substitute this with home cooked meals; if you have access to public transport, avoid car loans. It may be a bit hard to digest but simple choices and conveniences make life easier and less expensive in the long run. Besides, the cost of acquiring assets that need hard money to be maintained is too big a trap to fall into. Avoid plastic (credit cards) to the extent possible and curtail borrowings keeping loans only for emergency needs. When you keep yourself free of debt you lead a life full of enriching possibilities.
If you have loans that are consuming too much of your time, energy and resources adopt the debt snowballing technique wherein you pay off the smallest balances before zeroing in on big ticket loans carrying the highest interest. You will realize that paying off debts makes it possible to nurture an emergency fund more efficiently.
Close the mortgage before it shuts the door on your future
The mortgage payment is with you for life or at least a major portion of it, and the sooner you tackle the home loan outstanding, the more secure will be your financial future. Repeat to yourself the simple truth that you want to move gradually into a debt free lifestyle before you approach retirement, and the sooner you repay the mortgage the better are the chances for securing your life after retirement.
These are actionable personal finance advices that can make a big difference to the quality of your life, leaving you free to do what you really want to accomplish, besides increasing your leisure time and the moments that you spend with your family. As they say, think big but start small, and soon you will be zeroing in on a healthy and peaceful lifestyle that would be the envy of even financially well placed celebrities.