We all know someone who is really good at managing his or her personal finances. You know, that person with the budgets and excel spreadsheets for everything. People who are good with personal finance management don’t necessarily earn more; they just work harder at controlling each cent they make. But you can too.
Here are well-know international financial experts’ 14 Ways To Manage Personal Finance Better.
Tip 1: Start with the root of the problem
Suze Orman, the well-known financial advisor, author and motivational speaker says: “The only way you will ever permanently take control of your financial life is to dig deep and fix the root problem.”
Effective personal finance is not a hit-and-miss strategy. You can’t only get it right every other month; it has to become something you take seriously every month. In order to do this, you have to get to that root problem that is standing in your way. Think hard and write down the top three things preventing you from taking control of your finances. Once you’ve done this, write down practical ways how you can curb each problem.
Tip 2: Live by a strict budget
Dave Ramsey, the radio host, motivational speaker and author of books like The Total Money Makeover and Financial Peace says: “You’ve got to tell your money what to do or it will leave.”
Such simple, yet incredibly powerful advice. If you don’t set up a monthly budget and apportion funds for various expenses as well as short-, medium- and long-term saving goals, you won’t be able to track your spending. If you have no control overspending, and no back-up savings, you run the risk of making debt.
Need help creating a budget, click here.
Tip 3: Change your money habits for the better
Another familiar motivational speaker and personal finance author is Tony Robbins. With books like Unlimited Power and Unleash the Power Within, Tony Robbins believes that “For changes to be of any true value, they’ve got to be lasting and consistent.”
We agree. Practice makes perfect. Be consistent with your budget and every change you implement.
Tip 4: Save! Save! Save!
The business tycoon and investor Warren Buffet doesn’t need any introduction, and his advice is just as solid as his bank account. He says: “Do not save what is left after spending, but spend what is left after saving.”
In the current South African consumer market, this advice might seem a little over the top. However, seeing that 23% of South Africans have hardly any money left at the end of the month and 77% are broke, it is essential to get into the habit of saving something every month.
Click here for some advice on how to save more.
Tip 5: Prepare for emergencies
The award-winning author of over 23 books, Mary Hunt, is passionate about helping people cope with personal finance. She advises: “People don’t get into financial trouble because of the rent. They’re used to paying that each month,…It’s the expenses that are not predictable or regular that can be difficult.”
Does this statement ring true in your life? If so prepare for your emergencies by creating an emergency fund.
Tip 6: Save 10% of what you make
David Chilton is a well-known Canadian author and financial planner. His advice is: “Wealth beyond your wildest dreams is possible if you follow the golden rule: Invest ten percent of all you make for long-term growth. If you follow that one simple guideline, someday you’ll be a very rich man.”
As with Tip 4, saving (or investing), 10% of what you earn is not always possible. However, this is an extremely valuable goal for you to work your way towards. This is also something parents can instil with their children from a young age to form this habit early on.
Tip 7: Get your priorities right!
As a professional motivational speaker and the author of popular and controversial books like The Idiot Factor: The 10 Ways We Sabotage Our Life, Money and Business, Larry Winget has gained a reputation for himself as someone who says it as it is.
His advice? “People don’t have money problems; they have priority problems. Get your priorities right and your money will get right.”
In today’s South African market this advice is partly true. Yes, we have some priority problems that are causing us to save less (and spend more) but with all our expenses going up, we are being squeezed for every cent. As a result, we have to prioritise and plan even more effectively.
If you are unable to manage your personal finance because of debt, contact Debt Rescue. Debt counselling could assist you in managing your finances better.
Tip 8: Invest in yourself
Paul Clitheroe, the Australian financial analyst and financial advisor says that it is important to: “Invest in yourself. Your career is the engine of your wealth.”
Sometimes the only thing standing between you and that promotion or a higher-earning job is the right qualification. If this is true in your career, investing in yourself is a very good idea and it should form part of your monthly budget.
Tip 9: Recognise your money problems
Jack Canfield is one of the names behind the popular Chicken Soup for the Soul series, which has sold over 500-million copies and has been translated into over 40 languages. As a man who knows about motivating people, his advice is simple: “You can’t heal what you don’t acknowledge.”
Before any person can make a change and commit to that change, he or she has to first admit that there is a good reason for it. What do your finances look like?
Tip 10: Free yourself from bad debt
You may have heard of the book Rich Dad Poor Dad? The name behind this hit and the founder of the Rich Dad Company is Robert Kiyosaki. According to him freeing yourself from bad debt is a way to start the journey towards wealth and freedom.
There are many books and self-help advice to get you started on this road. If you are too over-indebted to free yourself from debt on your own, debt review could be a solution.
Tip 11: Spend less than you earn and save the difference
Money coach Todd Tresidder, and the man behind FinancialMentor.com had a zero net worth when he was 23-years old. However, 12 years later he had a net worth of $1-million. But how? He says: “Wealth building is simple and can be fully explained in just one sentence: Spend less than you earn and invest the difference wisely. If you get that right you will be wealthy. Everything else is just details.”
Investing is obviously a whole different ball game and should not be entered into until you have complete and utter control of your finances, debt and retirement savings. But you can and should SAVE that difference in an interest accruing account in the meanwhile. The key take-away in his advice is to spend less than you earn, which is something South Africans struggle with.
Tip 12: Draw your budget in cash & prevent overspending
The well-liked consumer expert Clark Howard has his own radio talk show where he shares advice on how to save more and avoid getting ripped off. He says: “Pay in cash for whatever you can, using envelopes to divvy up your money and keep you within budget.”
This is excellent practical advice. These days it is so easy to swipe for anything and everything, which makes it difficult to stick to your budget. If you are overspending every month try his system. Draw your weekly budget in cash and place it in an envelope. It is also a good way to practice appreciating the value of every Rand you spend seeing as you have to physically part with your money.
Tip 13: Update your budget frequently
As a senior financial advisor for a large financial institution, Kathryn Garrison knows about managing money. She advises: “Set aside an hour twice a month to update your budget and make sure your accounts are balancing.”
Simply making a budget at the beginning of the year and trying to follow it every month will not cut it. You’ll soon realise that your accounts aren’t balancing because you may have forgotten about this and that or some of your subscriptions or policies may have increased in price. By making a fresh budget every month and tracking it frequently, it will be more difficult for you to lose track of your spending.
Tip 14: Restrict access to your savings
As a financial journalist, author and motivational speaker, Jean Chatzky has made a name for herself in the financial industry. Her advice is to restrict access to your savings, “If you can’t see it and you can’t touch it, you won’t spend it”, she says.
It is clear that saving is the most important theme when it comes to learning how to manage your finances better. If you are not saving you are running the risk of falling into debt when unexpected expenses arise or when you don’t have an income to rely on later in life. So when you do get into the habit of saving, it is important to not have easy access to these savings. Keep your savings separate from your normal account and “forget” about it, so as not to tempt yourself.
At Debt Rescue we are passionate about getting over-indebted consumers back on their feet through professional debt counselling. If your debt has spiralled out of control, ask our help. You are not alone.