Financial Planning

Why Managing Your Personal Finances is Easier Than You Think

No longer do you need many hours and an abacus to manage your personal finances. In fact, doing so is a lot easier than you think!

Technology has a come a long way, making it a breeze to keep track of what you’re spending, where, create budgets, spend more wisely, and meet savings and investment goals

Life has so many expenses these days, spending can feel like a runaway train that you have no control over, but that’s not the case.

Here are some tips to put yourself back in charge of your own hard-earned money:

1. Track It

Luckily, most of us pay for things with credit or debit cards, automatic bank withdrawal or checks. This means there is a record of nearly every penny, outside of petty cash.

Review your bills and log what you spend each month on food, housing, clothing, pharmacy items, automotive needs, entertainment and more.

2. Create a Budget

Armed with the spending data you have and knowledge of your fixed and variable expenses, create a realistic budget that you know you can follow.

Use self-discipline to do so, with allowances for each category.

3. Budget for Savings

Don’t forget to include savings in that budget plan. The rainy day fund is important for unforeseen expenses and emergencies down the road.

You’ll also want some of the savings to serve as long-term, interest-earning investment.

Ten percent of your income or more would be ideal.

4. Just Say Yes to Free Money

If you have an employer who offers matching 401K or health savings plan contributions, find any way you can to maximize your savings so you can maximize your matched amount.

Don’t miss out on an opportunity for free money and a reduction in your taxable income.

5. Assess Your Bills

Are you getting the best prices for your electricity, phones, cable and all your insurance plans?

You need to review your plans and policies on a regular basis, compare with other companies, and make sure you’re getting the best possible deal at all times.

Also make sure you are only paying for the services and coverages you actually use or need.

Mark your calendar and review at regularly-scheduled intervals.

Managing your personal finances

6. Review Your Credit Report and Score

Review your credit report with all three national reporting agencies and report any inaccuracies.

Your three-digit credit score is a magic number. It tells lenders how well you manage your own finances and how reliably you make payments.

Scores range between 500 and 850. The higher the number, the better your chance of getting credit in the first place, and the better your interest rates and APRs will be.

You can receive your credit report from all three national reporting agencies for free once per year, and purchase it after that if you need to check it more often.

7. Banish Credit Card Debt

Credit cards can be good for emergency, but carrying an ongoing balance can make it easy to spend significantly more than you need to in the long run, without actually having anything more to show for your money.

Credit cards actually cost you quite a bit of money. Tighten your belt just long enough to get these debts paid off.

Remember too, you can take advantage of the 30-day grace period to float a debt interest free, just don’t let it go beyond that time frame.

8. Keep Interest Rates Low

In case of emergency, for those months when you simply can’t pay up on time, be sure to keep track of your interest rates and APR.

Call credit card companies to renegotiate every 6 months based on your good credit score and payment history.

When you do need to accumulate debt for important purchases such as a home or education, do it through managed, low-interest loans instead of credit cards with high interest rates.

When you shop for loans, look for and insist on the best possible rates.

Refinance long-term loans or mortgages when interest rates drop, making sure to take closing or other fees into consideration when you make your calculations.

9. Avoid Fees and Fines

Pay bills on time to avoid late charges. Keep track of when bills are due, maintain a due date and expense calendar and set up regular payments.

If the unexpected happens, you can always postpone a payment, but by having it scheduled you reduce the risk of missing it entirely.

Be sure to monitor your cash inflow and outflow at the bank as well.

Some people find it easier to maintain separate accounts for bills versus petty cash.

Others use credit cards for spending petty cash, or give themselves a monthly allowance to keep in their pockets.

However it works best for you, just make sure not to overdraft. Bank fees for doing so can cost you more than a loan shark would. Be careful.

10. Choose the Right Financial Institutions

Use legitimate financial institutions that are FDIC-insured. Shop rates, fees and fund-clearance times.

Don’t take pay day loans or use check cashing services.

Check with professional and local associations to see if a credit union is available to you. They typically have lower fees and better perks.

11. Spend Wisely

Not everyone has time to be an extreme coupon clipper, but it can really pay to buy during sales and keep an eye out for coupons in your weekly newspapers, circulars and online.

Only use coupons for items and services you already use and purchase. It’s not a savings if you start buying things just because it’s a good deal.

You can do it. Keeping track of your money alone can save you hundreds or even thousands of dollars each year, even without any additional sacrifices on your part. Mint.com is a free service that can help you manage your personal finances free of charge. Sign up today and make your hard-earned money go further.

Mary Hiers is a personal finance writer who helps people earn more and spend less.