Are Your Personal Finances Are Hurting?
A common misconception is that because a person is able to save a little money and make all of their bills that they have good personal financial habits. However, this is completely wrong, just because you aren’t living paycheck to paycheck doesn’t mean that you are in good financial standing.
A person that has good money management skills, is able to pay all of their bills, while also saving and being able to spend money at the same time. This person will not be worried about their financial funds and be secure in their financial standing no matter the situation.
Not to mention, this financially healthy individual will be governed by a budget. Their budget will be concise and detailed, outlining each expenditure and planning for any extra expenses. A budget is key when it comes to be financially stable and having success in the future.
For those who struggle with their finances, it’s probably because they are lacking in some area or aren’t fully aware of where they are making mistakes. Here’s a good way to asses if you could use a little help with your personal finances.
Not using a monthly budget.
A budget is vital if you want to be financially successful and avoid personal financial issues in the future. In addition, a budget will keep you focused and you finances on track.
The number one thing about a budget is that you have to write it down, just thinking about how you are planning to spend your money is not good enough. When it is on paper, you will remember it better and it will be easier for you to keep track of your spending. In addition, you will know your limits so you will avoid going over them more often than not.
Having a small savings fund.
Having a couple hundred or thousand dollars in your savings account doesn’t mean you are doing your best. The key to savings is that you are putting money away consistently. This means that not once a month but on a regular basis you are putting money into a separate savings account.
The problem with just making large sum deposits into a savings account every once in awhile is that you are being consistent and it could put a strain on your finances. When you are saving, you should be putting away a consistent amount every week or everyday, that way at the end of the month you aren’t scrambling to save funds.
Not having a separate savings account.
Most people have a checking account of some sort but very few have a savings account. This is a big problem. Anyone with a checking account should also have a savings account.
Keeping them separate is important so that you don’t end up spending the money that you should be saving. Also you will be less tempted to use your savings account anytime you want to spend more money.
For those of you who struggle the most with your personal finances, consider getting a savings account at a different bank. You will be less tempted to spend your savings and not have to worry about confusing the funds with your active checking account.
Not being able to make monthly payments on your debts.
You might think that being able to make your monthly payments on your credit card debt is good but it actually is only making your situation worse. Monthly payments are the bare minimum a credit card user can pay to their credit card debt not including interest or late fees.
Minimum payments will actually end up costing you more in the long run as interests accumulates on them. The best way to pay off credit card debt is too make large payments including interest, every month or regularly so that you get out of the debt quick and not end up with most of your money going towards the interest.
You have a small emergency funds.
An emergency fund is totally different from a savings fund. An emergency fund is for critical situations, unlike a savings fund which is money set aside to use later. A lot of people like to save for both together but that is dangerous. You won’t know which amount to use in which situation and will be more prone to spending it all when you find yourself in a difficult situation.
Also an emergency fund is for when you find yourself in an unexpected financial situation, like a medical emergency or emergency moving or an unexpected pregnancy or marriage. Any situation that you didn’t plan for but is going to cost you a significant amount of money. Whereas, a savings fund is for use later like when you want to buy a house or a car.
Your bank account is constantly low on funds.
Having a little bit of funds in your bank account every week is not good. You will be stressed out constantly and won’t have any funds for saving. You won’t be able to be free with your spending and will constantly feel limited.
Your bank account should have a decent amount of money in it at all times. This doesn’t mean that it needs to be a very high amount but enough that you can spend when you want but also have as backup.
Also some banks charge fees when your account is low because of their minimum amount standards. These fees can add up and end yup putting your account in the negative and costing you more.
How to improve your personal finances.
If you are suffering from bad financial habits, it’s not too late to change. You can start whenever, the important things is that you start and become more aware of how to improve your personal finances. A few quick steps to get started are to:
- Make a budget
- Open a savings account
- Calculate your debt
Once you have done these things, stay committed to your plan and you will definitely start seeing results. Changing your personal finances is a process that won’t happen over night but will pay off in the long run.