When it comes down to it, money management is one of the most complicated adult responsibilities. Not only do have to make sure that your checking account is balanced – you also have to make sure that you have enough capital for daily expenses. If you have children, you also have to think about putting money away for future expenses, like college tuition. On top of everything, you must have a rainy day fund – you never know when a medical or life emergency could occur. Indeed, in order to improve personal finances, you need to be organized and you need to have a budget. Here are five helpful personal finance and money management tips.
- Don’t let your salary dictate your lifestyle. One of the biggest reasons individuals live beyond their means is because they allow the amount of money they make dictate their lifestyle. Many economists recommend living below your means if you want to remain fiscally secure. If you get a raise at work, you may want to refrain from buying a new car or getting a big house – at least until you know that your income will be steady for a long time.
- Don’t spend more than a third of your monthly salary on rent. It is also recommended to not spend more than a third of your monthly salary on rent. If you think about it – it makes sense: you want to have enough money left over to pay for all your other expenses. If you are paying too much for your living arrangement, you could be falling short in other areas. If you can’t afford to live in a certain neighborhood or city, you may want to get some roommates.
- Don’t overuse your credit card. In this day and age, using a credit card can be like wielding a sword. Some credit cards make it so easy to spend money – it’s a wonder why everyone isn’t broke. However, just because the money is easy to spend, it doesn’t mean that it is actually yours to spend. You have to realize that you will get a big bill at the end of the month. The last thing you want is to wind up with a mountain of credit card debt.
- Don’t ignore debt. It is also incredibly important to not ignore your debt. If you have student loans, tax debts, or even credit card bills piling up, you want to spend the time – and the money – to pay those debts off. The last thing you want is a bunch of bills gnawing at your finances. Moreover, you don’t want your debts to go into collections where they will affect your credit.
- Don’t forget to keep an emergency fund. On top of everything, you also want to maintain an emergency fund. This fund can be used for everything from medical emergencies to life emergencies. If you don’t have an emergency fund, it may be smart to start growing one. In the end, the last thing you want is to be stranded on a fiscal desert island without a life raft.