Money is one of the basic necessities of life. Yet most people find it tough to manage their finances in a possible manner. Here are some personal finance tips which you can follow to manage your personal tips with care-
Learn To Use A Credit Card
Credit cards are a really useful commodity. They may or may not work for you; depending on the exact manner you use them. However, one major issue with credit cards is that people gain access to them before they know about them. You can take the help of a family member to know exactly how they work.
How To Plan Your Budget?
Planning a budget is something that people either love or hate. You can divide your money into 2 different accounts-one meant for business and another for pleasure. You can give yourself an ‘’allowance’’ to do whatever you want in a month. The remaining amount will stay in your business account to pay your bills and another day to day expenses.
Understand the Time Value of Money
The time value of money is an easy principle which you need to understand-it states that any amount of money has more value than what it will hold in the future because of high earning potential. So, if you have $50 to invest at present, it is worth more than $50 a year from today, as it will be gaining value via investments for one year. Let’s assume you average 8% on your investments. The $50 you have will be worth $58 in a year, whereas getting $50 a year from now is worth $42 since the value of money lost in the year.
Begin Investing at An Early Stage
Let’s assume that a person starts investing at an early stage in life and the time value of the money he invests enables for gaining potential in such a way that though another person invested more than 3 times of the same amount, the former gained more than $300K on his retirement. So if you start investing now, you will have much more than if you wait for making more money, even if you invest more in the future. You can consult accounting firms to invest wisely.
Maintain A Record
You may be of the opinion that record-keeping is only meant for large organizations and medium enterprises. But, to manage your finances effectively, you will need to keep a documented account of your earnings vs. spending. Have a clear idea of how much you are earning, and what are your expenses and debts. In case you are graduating with a student loan or have just completed your graduation, you will get a six-month grace period before your repayment schedule starts. This is the time period which the majority of students refer to as their financial intermediary and try to figure out how much they owe. Avoid doing that. Be it restructuring your student loan or deciding how much you need to keep separately for meeting your vacation expenses; calculate your essential expenses and probable debts will be in the next couple of years. Document all of these, in a notebook or software such as Excel. By doing so, maintaining records will be considerably easier for you.
Start Saving Money At An Early Stage
Making from 100-250 $ in a period of ten years may not make a major difference, and with small numbers and small-time periods, the time value of money isn’t highly impressive. But the larger the amount of money and time period, the larger the amount you will earn without even lifting a finger.
I am a chartered accountant by profession and writing is my side passion. I have a main interest in tax and finance related articles. I also provide tax-related consultancy services like VAT registration and VAT consultant services.