There is no singular approach to having a successful personal finance story. It all depends on your status, financial situation, and preferences. While some people learn how to be in charge of their financial situation early in life, some tend to catch up later. But if you’re nowhere near being in control of your financial life, it’s not too late to start.
Let’s look at ways to begin to handle your finances better.
6 Ways to keep track of your personal finances
1. Have honest conversations with yourself
You need to be comfortable discussing money with yourself. The first thing is to consider how much you make and how you spend. Question your wants. Ask yourself if you really need to buy that gadget or splurge on something luxurious. Do you need it? Is it important? Can it wait? What’s your financial goal? Basically, ask honest questions about your spending, recognize where you’re making a mistake, and look for ways to fix it.
2. Get rid of debt
Many people are swimming in debt. This is because money is never enough, so they borrow to keep up. But the first favour you can show yourself is finding a way to clear your debts from loans, mortgages, or any type of debt. Channel a portion of your earnings to pay your debt, and soon enough, you’ll have it under control. Find out more on how to divide your earnings with this trusted budgeting rule.
3. Learn how to budget
Spend less than you make. Having a budget weekly or monthly helps you keep track of your finances. You can monitor where you are spending more or less and what you need to cut down. It also allows you to know how much you should budget towards a specific need or item, categorize your expenses, keep track, etc., so you don’t end up overspending. There are several budgeting apps you can use, or you can use a simple Excel Sheet.
Spend less than you make.
Learn more here about 6 steps to create a Budget.
4. Read books
By reading personal finance books, You will get great advice from money experts and equally make yourself financially knowledgeable. You’ll be learning from people who worked their way from significant debts to financial freedom and also learn tips and tricks that will work best for your financial status. There are enough resources to help you keep track of personal finance. You can also listen to podcasts, audiobooks, and more.
5. Emergency funds
No one likes emergencies, but the truth is, they happen. This is why an emergency fund is important. Emergency Funds is money kept away for emergencies or financial needs. So instead of scrambling around for cash when you’re in a crisis or distress, you can quickly go to your emergency funds and use them as a safety net.
Spending money is equally essential to saving it. One habit you should embrace more is saving money. You can easily start with the 50-30-20 rule. This means 50% of your money goes to your needs, 30% to your wants, and 20% to your savings. If you start saving 20% of your money, you are guaranteed to have some money saved every month. You can decide to make a savings goal to encourage yourself, maybe saving for a new purpose or towards retirement.
Mistakes to avoid when tracking your personal finances
- Setting too many goals
- Expecting your finances to be settled immediately
- Making emotional decisions
- Living above your means
- Avoiding debt repayment
- Not tracking your spending
- Putting wants along with needs
- Not having an emergency fund
- Spending as you earn
- Not being financially literate
Keeping track of personal finances is not a day’s job, but it gets easier as you put it into practice. You might have to cut down on many of your expenses and live below your means, but that is the sacrifice you’ll make to work your way to a debt-free and financially independent life. Remember that you don’t have to do it alone; you can always seek advice from people you look up to.