Managing finances can be stressful for many people. From trying to make ends meet to keep track of bank fees and making sure that their debt is under control, the task can be overwhelming especially for those with busy schedules and tight budgets. It doesn’t have to be that way, however.
For many, the stress isn’t related to the activity of managing finances as much as the lack of preparation for having an organised flow of the process. That – in many cases – could be the cause for feeling unable to control their finances.
To get your finances under control, keep the following points in mind.
Your budget
Do you even have one? Many people may randomly refer to their budgets, but they’ve never worked out a detailed one. If you can relate to that group, get a budget today. Sit down and figure out where your money comes from and where it goes. Use your bank statements and receipts for a month to make it as detailed as possible. Highlight your essential categories (rent, tuition, transportation, etc.) and also be aware of the amount of dispensable income you have in every pay period. This exercise is the cornerstone in the foundation of building a healthy financial life.
Your debt
Debt is a snowball that can swallow your income. If you’ve any amount of significant debt, you need to look carefully into ways to pay it down or at least make sure that you’re not paying any additional interest on it. The first step toward achieving this goal is to speak with your bank representative and understand exactly how to avoid any additional fees or charges. In addition, be clear about how much debt you can handle within your budget. For example, if you’ve already a car loan and a personal loan, for which you’ve committed to monthly payments, you really must think twice before going ahead and taking out any extra credit. When you make the decision about how much debt you can handle, consider all the odds from losing your job (or a spouse’s job) to having to relocate, for example. In other words, just like you do take debt over many years, make sure you will be in a financial position to pay it over the long run, as well.
Your income
Your income isn’t a mystery, but how much you actually go home with may vary month by month if you’re working on commission basis, hourly, receiving overtime, etc. To be able to manage your finance you need to know roughly how much money you’re taking home. One way to know that is to look to the previous year and average the monthly income. Once you’ve a clear idea of how much money you’re making, the next step will be to find your cash flow pattern. Many people who are working in retail jobs may be making more money around the holidays or other seasonal events, planning your expenses based on the good times can be misleading. To make your calculation more accurate, be conservative and plan as close as possible to the worst-case scenario.
Your investments
Your knowledge of investment strategies and goals will help you determine how much help you need with your investment to maintain a good financial position – as well as your sanity. If you’re not investment-savvy, seek a trusted investment adviser. In short, this is something that requires continuous maintenance and knowledge, and you may find placing it in the hands of an expert (even though it may cost you some money) is a better choice. You still must keep tabs on where your money is invested and try your best to be the second pair of eyes that looks over every investment decision made with you or on your behalf.
Rania Oteify, a former Gulf News Business Features Editor, is currently a Seattle-based editor.
