10 Tips on Managing Your Finances [The Best Guide]

Personal finance is one of the top blog topics on the Internet. There are thousands of sites dedicated to helping people improve their finances, yet keeping finances straight is one of the major problems many families have. Here are some tips that can help you manage your finances.

Tips on Managing Your Finances

1. Know Your Net Worth

Before beginning anything else related to your family’s finances, it’s a good idea to figure out where you stand. This will require figuring out your net worth. You’ll need to add up all of your assets on one side of a ledger and then add up all of your debts on the other side. If the assets side has a higher number, you have a positive net worth.

On the other hand, if the liabilities side has more, you have a negative net worth, and you’ll need to work on getting out of debt. Checking with a financial adviser like those at NortheastWealth.com.au could help you make some headway in figuring out where you stand.

2. Set Up a Budget

The next tip for managing your finances is to set up a budget. You should be able to account for every penny that’s coming into your household. You should also track every monthly payment you owe. You will likely have some fixed payments like mortgages, car loans, and utility payments. There will also be some discretionary spending. This is the money you spend at the grocery stores, restaurants and gas stations.

If the income is higher than the expenses, that’s a good sign you’ll be able to build some wealth. On the other hand, if you have more coming out of your household than you have coming in, you’ll build up debt over time.

3. Pay Off High-Interest Debt

After figuring out where you stand in terms of net worth and a monthly budget, you’ll want to pay off any high-interest debt you might have. This would include credit card debt and personal loans. Some student loan debt might fall into the high-interest category. It’s important to get rid of this debt as soon as possible.

Every dollar that goes toward interest payments is a dollar that will not go toward building the positive side of your balance sheet.

4. Cut Expenses

Just about every person can find somewhere they can cut his or her budget. If you’re eating out three times a week, it’s possible to cut that down to two times a week and put the difference toward another goal like saving for retirement or paying down debt. Cutting out all restaurant spending would improve your finances even more.

Downsizing from a gas-guzzling SUV that you’re buying on a loan to a gas-sipping economy car that you’ve paid off will make an even bigger difference to your finances. Keeping expenses low, especially if you have a relatively low income, is key.

5. Build a Rainy Day Fund

Emergencies happen. Your car might blow a gasket. You might have to go to a funeral that’s being held outside your hometown. It’s better to have plenty of money saved up to take care of these expenses than it is to have to go into debt. Some studies have shown that more than 40% of Americans cannot easily handle a $400 emergency expense.

Saving up for three to six months of expenses is a common recommendation from personal finance experts. Saving even a few dollars a month toward an emergency fund is better than saving nothing.

6. Pay Yourself First

Those who get rich don’t spend every dollar they have coming in. There are bills to pay. The first bill should be made out to yourself. Whether you’re saving up for a house or retirement, you should aim to save some of your income each and every payday. Those who pay everybody else first and then save what’s leftover are not likely to have anything left over.

On the other hand, if you pay everybody else after you pay yourself first, you’ll be more likely to get creative in paying your bills and have something saved up.

7. Take Advantage of Matching Funds

One of the places it’s good to put the money you pay yourself is in a retirement account. This can especially be the case if you have a workplace retirement account and an employer that offers matching funds. Some employers will match $1 for $1. That’s a 100% return on your investment, and it hits your account immediately. When saving for retirement, it’s always good to max out your matching funds.

8. Max Out Tax-Advantaged Funds

One of the best ways to really build wealth is to max out all the tax-advantaged funds available to you before investing in an ordinary taxable account. Most Americans who have access to a 401(k) or similar retirement savings account will also be able to save in an IRA. Every dollar you save in a traditional retirement account will be on a tax-deferred basis, which means you’ll have more of your money available to save.

After taking advantage of the match in a workplace account, it might be worth the effort to save the max in a Roth IRA. With traditional and Roth funds, you’ll have more flexibility in spending down your stash when you retire.

9. Pay Off Your House

If you’ve bought a house, it’s likely you have a 15- or 30-year mortgage. If you’re saving a healthy amount of money, you’ve paid off debt and you have a healthy emergency fund set up, it’s a good idea to pay off the house. A home mortgage will likely be your biggest bill, and without it, you can supercharge your savings even more. You could also give some of your money away.

10. Give Back

You should try this at any point in your personal finance journey. Even if you can’t give a cash gift, it’s likely you can find a charitable or religious organization that fits with your worldview. Giving back to your community is a great way to stay grounded and keep from becoming overly greedy.

Taking care of your finances can be a challenge. Getting started is the most important step to take. After taking the first step, even a little wealth can start to grow on its own. Paying off debt and building up savings is key to winning with money. 

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