When it comes to money matters, even the smartest of us can make some bad money choices. From falling in love at first sight with an expensive car to shiny gadgets, life is fraught with financial choices that are made rather impulsively instead of a well thought out decision. Moves that can, and often do, lead to costly mistakes. In order to sidestep major money blunders, resisting first impulses, though not easy to do, is absolutely crucial to effective money management.
Making financial decisions, and feeling confident about them, is no easy task. The decisions we make with our money can have long term effects on our financial well-being.
Here are 5 tips that will guide you to make better money choices in the future.
1. Create a Budget
Creating a budget is the most fundamental rule of thumb when it comes to money management. Smart money management begins with creating a budget and then sticking to it with utmost discipline and dedication. This might sound boring and repetitive, but how else will you know how much money is coming in and what’s being spent? A good budget sheet is not only your personal expense tracker but actually tracks every single penny of income too and allocates money accordingly, towards expenses that are planned and necessary.
A budget not only allows you to fulfill your short term financial goals in a planned manner but it also creates room for long term financial planning.
2. Pay Off Debt and Stay Out of Debt
One of the best things you can do for your finances is to pay off all of your debt. To get started, focus on your most expensive debt—the credit cards and loans that charge you the highest interest. Once you have paid off all of these debts, focus on paying the other debts. One can say that being debt-free is the first step into the world of financial freedom and happiness and living life comfortably.
3. Prepare for the Future - Set Savings Goals
Saving money for your future is of vital importance. If you don’t set savings goals and steadily work towards them, you will have to rely on credit when times get tough. You might even need to work through your retirement years to support yourself and your family. So go ahead, think of the retirement you wish to have, list down all the potential expenses you are expected to incur, and calculate how much you would need to save from now, in order to get to that number by the time you retire.
4. Think Twice Before Making Major Financial Decisions or Purchases
Many people will do more research before buying a TV than they will before purchasing an investment or buying a home. Make sure that you’re not one of them. While buying a home might seem like the most exciting move, make sure you go through every detail of the purchase, negotiate a good price, make a repayment plan before you sign the papers.
Buying a home and saving for retirement are two of the biggest financial decisions.
So from now on, cultivate a habit to always research and do your homework before you make any major financial decision.
5. Educate Yourself to Build Financial Confidence
Most people shy away from learning about personal finances because there’s a common misconception that learning about finances is a complicated process. However, with the worldwide web at your fingertips, it’s easy to learn just about any topic, in a matter of minutes. Therefore, invest time learning about various aspects of your personal finances.
Some of the common topics to brush through would be budgets, savings, investments, money habits, financial goals, tax planning, banking, credit cards, loans, insurance, and emergency funds among many others.
Managing your personal finances can be fun, provided you tread with caution, and learn to check yourself at every step. Remember that some of the best ways to manage money are self-taught. And while we might not have our own personal financial advisor at our beck and call, we can learn a few tips and tricks to learn to think like one and start making smart financial decisions when it comes to our hard-earned money.
So the next time you are about to make a big financial decision, think through it, sleep over it if you have to, but remember to never be hasty about it.
