Tips For Managing Your Personal Finances

Managing personal finances can be daunting, but it's a critical skill that can help you achieve financial stability and your goals whether saving for a house, planning for retirement, or trying to get out of debt, having a solid financial plan is essential. You can use various tips and strategies to manage your finances more effectively. 

Using your family budget to manage your personal finances

We shared in a previous article that crafting a family budget demands a considerable amount of time, discipline, and persistence. But it's worth it in the long run. Consumers must recognize that budgeting is not a one-time event, nor can it be accomplished through a "set it and forget it" approach. Continual review and adjustment are necessary to ensure that you are on track to meet your financial objectives. Choosing the right budgeting strategy is key, and we suggest using the 50/20/30 methodology as a starting point. While it may entail some upfront effort, this approach can help you achieve long-term financial stability.

To recap the 50/20/30 methodology, consider that with this system, budgeters apply 50% of their money toward their needs, 20% to their savings, and 30% to their wants. And once these parameters are set, you can master your personal finances. But you may need more than just a budget to help you manage those personal expenses. But you may need more than just a budget to help you manage those personal expenses; you made need to change spending habits.

1. Create a budget 

As mentioned above, creating a budget is the first step in controlling your finances. This is a great way to track your income and expenses and determine where your money is going. Use that information to help you better align with your financial goals.

2. Reduce your expenses 

Look for ways to reduce unnecessary expenses, such as dining out or subscription services. Consider negotiating bills or finding more affordable alternatives. If you are spending too much on your wants, for example, you may need to cut back on your spending in that category. And if you are spending too much on your needs, you may need to make some lifestyle changes.

3. Build an emergency fund

Building an emergency fund is a crucial component of managing personal finances and is part of that 20% category we mentioned earlier. The purpose of an emergency fund is to provide a cushion of savings that you can use to cover unexpected expenses or emergencies, such as job loss, medical bills, or car repairs. The exact amount may vary depending on your circumstances, however, a good rule of thumb is to set aside three to six months of living expenses.

Start by determining how much you must save based on your monthly expenses. Once you have a target amount (some subset of your 20% savings), set up a separate savings account for your emergency fund. This will help you avoid dipping into the fund for non-emergency expenses. And remember that your 20% towards savings should also go toward your retirement plan. 

Make saving for your emergency fund a priority. Consider setting up automatic monthly transfers from your checking account to your emergency fund savings account. Look for opportunities to boost your savings, such as setting aside tax refunds or work bonuses.

4. Pay off your debts 

A significant factor in your credit score is your credit utilization. This is a comparison of your total credit card and loan debts compared to your total credit limits. If your utilization is over 30% (meaning you owe 30% or more of your total credit limit), it can impact your credit score negatively. 

But paying off your debts can do more than help your credit utilization. It can also make your monthly payments more manageable. And there are two tried-and-true approaches to paying off your debts fast.

• The snowball method - This debt repayment strategy focuses on paying off the smallest loan or credit card balance first. After the smallest debt is paid in full, this approach involves making minimum payments on all debts and the previously allocated money is then redirected toward the next smallest debt. This approach results in a "snowball" effect as you continue paying off more prominent and significant debts over time.
• The avalanche method - This debt repayment strategy prioritizes paying your debt with the highest interest rate first. Rather than focusing on the smallest debt balance, this approach involves making minimum payments on all debts while allocating any extra funds toward the debt with the highest interest rate. Once that debt is paid off, you then apply the minimum payment amount plus any additional funds to the debt with the next-highest interest rate, and so on. This method can save you money in interest payments over the long term and help you become debt-free more quickly.

5. Invest for the future 

We’ve all heard rumors that social security will dry up around 2037. And though there is some truth, it won’t run out entirely. According to the Social Security Administration, due to modifications to Social Security legislation in 1983, it is projected that full benefits will be available on schedule until 2037, when the trust fund reserves are anticipated to be depleted. At that time, it is estimated that ongoing tax revenue will be adequate to provide 76 percent of the scheduled benefits. 

But even though you may be able to get all or part of your social security benefits, for most people more is needed to maintain their current lifestyle. This is why consumers need to take charge of their financial health in the future today. Here are some tips to help you invest better in the future.

• Start early - The earlier you invest, the more time your money has to grow and compound over time.
• Diversify your investments - Invest in a mix of different asset classes, such as stocks, bonds, and real estate, to reduce risk and maximize potential returns.
• Consider your risk tolerance - Determine your risk tolerance and invest in assets that align with your goals and comfort level. A financial advisor can help you identify the right investment strategy for your needs.

Following these personal finance tips can set you up for financial success today and tomorrow

We know how important it is to maintain a satisfying and fulfilling lifestyle. But worrying about money is unhealthy not just for your emotional health but your overall health as well. Managing your finances can get your spending in order and ensure you live within your means. And if you need some financial assistance now and then to cover your expenses, know that Cash Store is here for you. We offer installment, title, and cash loans that can keep you from falling behind while you are getting that budget in order.

*The content on this page provides general consumer information or tips. It is not financial advice or guidance. Each person’s circumstances are unique. The Cash Store may update this information periodically. This information may also include links or references to third-party resources or content. We do not endorse the third-party or guarantee the accuracy of this third-party information. There may be other resources that also serve your needs.