Even for the most experienced of us, financial management can be a tedious and daunting task. It is, however, even more challenging for the younger generation.
It is easy for recent graduates who only now started their first job to feel somewhat overwhelmed by all the newfound financial responsibilities that come with their first paycheck.
But managing your finances does not need to be that difficult. There is no fancy degree or special qualification required to manage your own money.
In fact, with a few simple tips and tricks, you can easily become your own accountant.
Take Control of Your Money
Making your own money means that you are now responsible for that money. So don’t leave it to your banker, your employer, or even your parents to take care of that, as no one will be as invested as you are when it comes to your finances. Your money means your responsibility. So get started and take control of your own money. Educate yourself on your financial situation and learn where your money comes from and where it goes to.
Keep Your Outgoings Smaller Than Your Income
The first step is to keep tabs on your income and your monthly expenses. Go through your financial statements and figure out how much money comes into your bank account and how much goes out.
Keep A Visual Record
Study your receipts and your bank statement and keep a visual documentation of your expenses. A foolproof way is to create a spreadsheet listing all of your fixed (rent, mortgage, insurance, etc.) and variable expenses (food, clothes, entertainment, etc).
Make Sure Your Outgoings Are Smaller Than Your Incomes
When analyzing your finances, the goal is simple: don’t spend more money than you have. However little or much you make, ensure that your expenses don’t exceed your income.
Learn Where Your Money Goes
Knowing your expenses is not enough – understand them. Find out what it is that you’re actually paying for. Educate yourself on your financial responsibilities such as income tax and pension schemes.
Generally, your employer will have a plan in place that will take care of both your taxes and your pension but that does not free you from the responsibility of learning about those things yourself. As mentioned above, your money is your responsibility, so don’t leave it to others to manage your finances. And understanding how your money flow works is a key part of this.
Budget Your Money
Now that you know what your expenses are, evaluate them. Maybe you could spend less on your nights out? Is there maybe a less expensive cable plan you could choose (or could you go without a tv completely)? And what about your weekly grocery shops? If you end up wasting most of your food anyway, that might perhaps be a good place to start saving – both the environment and some money.
Bearing all that information in mind, design a monthly budget for those expenses. Give yourself a realistic sum to spend on food, entertainment, and utilities.
Save Your Money
Now that you (hopefully) have all that extra cash, it’s time to start saving. Whether it’s a new car, a down payment for a house, a business, or even retirement, it is never too early to start saving for your future.
The question, however, is “How”?
Since you’re no longer a teenager, a piggy bank simply won’t do the trick. And in these uncertain times, you don’t really want to keep the money hidden under your mattress either.
So off to the bank it is.
Rather than letting your money waste away on just any kind of bank account, you should spend some time and energy finding just the right plan for you. You have worked hard to earn the money, and now it’s time for the money to work for you.
So here are some of the options that are available if you’re looking for a free bank account:
- The standard saver account: This is the most straightforward of all the plans. You can put money into the account whenever you like and you can equally take it out whenever you like. This is the right choice for you if you need the flexibility to withdraw cash whenever you need. However, it is worth noting that the interest is taxed.
- The regular savings account: Compared to the previous option, the regular savings account pays a higher interest rate. On the downside, however, you are required to pay money into the account on a regular basis (usually every month). Furthermore, you also won’t be able to access your money whenever you please, as this plan comes with stricter terms and conditions that limit your access.
- Cash ISA (UK) / IRA (US): Both the ISA and the IRA are ideal savings accounts for people who are serious about saving for retirement. They offer high interest rates as well as many tax advantages.
While the IRA, however, is subject to many rules that disable you to take out money before retirement, the ISA is much more flexible, as you can pay in or withdraw whenever you like.
These are only a few of the options that are available to you. So spend the time to do some research and compare plans to find out which suits you and your needs the best. Each option comes with its own set of rates and interests and its own set of advantages and disadvantages;make sure you have all the necessary information before committing to any plan.
When it comes to financial management and staying out of debt, the key is preparation and planning. Know where your money is and what’s happening to it. And once you have that knowledge use it wisely.
Yaakov Smith is an entrepreneur who is passionate about providing creative solutions to everyday business issues. He is the owner and founding manager of Logican Solutions Ltd, which offers a range of industry specific products, including claims management, debt management and property portfolio management.