Many people aspire to be financially secure. Hence, a good financial planning will help you to achieve financial freedom at early age.
So, what steps have you taken to achieve these goals? If it’s just wishful thinking, you are guaranteed not to be able to follow in the footsteps of successful people out there.
Since becoming financially secure is not something that can happen overnight, we must start as early as possible.
One of the ways is by managing and managing finance properly. Because, even if you have a large income, there is no guarantee that it will make you rich if you manage your finances wrong.
Well, this article was created in order to inspire and help you improve how to organize and manage finances. This is what we called as financial planning.
Financial Planning Tips from Richest People in The World
If you like to follow the story of the life journey of the richest people in the world, they have strategies and ways to manage the assets that they have.
Not a few of them are not from rich families. Instead, they came from scratch. Check out our list of billionaires who started from nothing.
However, they know how to manage finances carefully that leads them to this point today! So, it turns out that being a rich person also requires effort in order to remain being wealthy.
1. Always Have a Financial Planning
Many people think that financial planning are only for people who already wealthy. In fact, the habit of financial planning must be practiced from an early age. Including for those who are still in school! for example, you can plan a portion of the pocket money that can be saved.
There is no definite formula for managing finances, so this is a habit that must be developed from time to time.
After all, financial planning doesn’t always work. Again, it takes process and experience until you find the right formula for yourself.
Having a target can help you prepare a financial planning. You are guaranteed to have a strong motivation to plan finances neatly.
2. Track Your Expenses For a Month
If you’re not earning much from 9 to 5 jobs aka small salary, you should try to track your expenses for a month.
Sometimes, we really like to get confused about where our income spent to the point that it’s very low to meet our needs at the end of the month.
Let’s make a challenge! Starting from this month you record every money you spend. No matter how small, it should be noted.
Later at the end of the month, analyze each expenditure issued. Is it most of your spending goes to your needs or is just for the temptation of shopping?
There are also positive side effects of tracking these expenses. You think twice every time you want to buy something, because keeping track of your cash out is a burden of responsibility.
3. Invest on Yourself
It is undeniable that learning is a form of investment. Indirectly, learning is one way of managing future finances. Many successful people emphasize learning as much as possible, so you will enjoy the results in the future.
You can find someone who can be a role model in the things you want to work on. Maybe the income is not much, but believe me the lessons you get will generate more money with mature skills and experience.
How to Manage Finances for a Small Salary
If our salaries are mediocre, it will be difficult to manage finances, let alone set aside money for investment.
However, like it or not, you have to work around yourself so that your financial condition doesn’t stagnate in the future.
You have to invest if you want to have a better financial future. Even though your income is mediocre, don’t be discouraged just yet.
4. Set Aside Money For an Emergency Fund
Furthermore, preparing an emergency fund can be included in your financial planning.
You will feel the advantage of preparing an emergency fund when suddenly the emergency day come that requires fast money.
Many financial advisors say if you want to invest large amounts of money, make sure you have savings to survive for at least the next 6 months.
Additional tips that are still related to additional funds are to determine the lower limit of your savings.
For example, you set a lower limit for savings of $100. So when the nominal in your savings is below $100, let’s just assume that you have a debt to yourself. Even though you owe it to yourself, it’s best to pay it off immediately.
Most importantly, do not be tempted to use emergency funds for purposes that are not important and urgent.
5. Use a Credit Card Wisely
Indeed, there are more credit card promos than debit cards. However, you should be more careful about this. Including, don’t accept all credit card offers even though they look tempting.
If you feel like you can pay your bills at the end of the month, that’s fine. However, if you have doubts when you want to make a transaction, you should think about it carefully first.
Use a credit card to repay the needs that are truly essential for you. You shouldn’t use an emergency fund to pay credit card bills.
If you have to cut your emergency funds to pay off credit card bills, it means that the usage has exceeded your ability to pay.
6. Understand “The Power of Investing”
Investment is crucial in managing finances because it can guarantee finances in the future, not just the present!
In addition, investing can simultaneously make you get passive income. Some of the examples of investment are stocks, mutual funds, and property.
7. Start Planning to Save
Still not sure which strategy is the best for your saving mission? Don’t worry, just start planning it first.
By starting to plan, you will be able to know what is suitable and what is not for yourself.
You can look for inspiration from people you admire, but remember to be realistic with your current conditions.
8. Reduce & Cut Expenses Wisely
In order to have bigger money to invest, you have to make sacrifices on the expense side. For example, for a place to live you might consider moving to a cheaper location.
If you really save your biggest expenses, you can cut the budget that is actually not that urgent.
For example, such as gym membership, turning off lights and unplugging when not in use. Even so, you still have to be wise in cutting your budget.
9. Prioritize to Pay Off Debts With High Interest
These tips apply to those of you who have debt with more than one financial institution. You can try to list the nominal installments and interest charged.
Next, try to settle the debt of the highest interest first. By doing this, you will be able to pay off loans faster.
In addition, keep paying off debts on time. Debt that is paid past maturity is usually subject to additional interest.
Or the best way is to find installments with zero percent interest so that your bill doesn’t get heavier.
10. Change Some Habits
Some small habits can lead to several transactions. For example, something as simple as scrolling the main marketplace page with various promos and discounts, can really end up buying things that are not really needed.
It’s okay to look for promos and discounts when you want to buy something, but don’t let it be the other way around.
11. Find Additional Income
If you have cut a lot of expenses but still haven’t had a big impact on salary savings, maybe another way is to find additional income.
You can apply this method if you have enough time and energy. Don’t let it be for the sake of getting additional income, you don’t work optimally in the main job.
Mistakes in How to Manage Personal Financial Planning
Do you want to know, the mistakes people make about how to organize and manage other personal financial planning?
Lets have a look at the list below. Who knows, it could be your evaluation material in managing finances.
1. Living From Salary to Salary
The next mistake in how to manage personal finances is to live from salary to salary. Most of the people do not think about other sources of income other than a monthly salary. This is a big mistake.
Because, maybe you will need money to pay for urgent needs or, even worse, you lose your job.
That is why financial experts recommend the younger generation to have other sources of income such as from side jobs / businesses and investments that provide passive income.
2. Not Taking Notes on Small Expenses
Most people only supervise routine expenses such as paying electricity bills, credit card installments, monthly shopping etc.
However, many do not supervise small expenses such as parking, snacks, tolls etc. In fact, this irregular expenditure is often the cause of waste.
It’s good, you record all expenses. Of course this will really help you control your finances.
To help you record expenses, an expense recording application is now available which you can download for free.
3. Thinking That Saving is Like Investing
A study states that 79% of the younger generation set aside their income for savings. They also think that saving is the same as investing.
In fact, saving and investing are not the same.
Saving is an activity to set aside money to be saved and used at any time. Usually the money is deposited in a bank account that does not give a return, or gives very little return.
Meanwhile, investing is a long-term financial strategy by saving money in investment instruments that provide returns on savings.
Examples of such investment instruments are mutual funds, gold investments, stocks and so on.
4. Combining Savings Accounts and Daily Accounts
The intention to save every month will be in vain if you only have one account.
Money runs out easier because you feel you still have a lot of money in your account. If you want to seriously raise money, you should separate accounts for daily transaction needs and a savings account.
5. Save After Satisfied Shopping
If you do this, there will likely be nothing left to save.
If there is, the value is too small. In fact, setting aside money for investment should be done before you shop.
That is, after getting income, cut it first for savings. The rest, just use it for shopping.
To prevent you from making mistakes in this way of managing your personal finances, you can use an auto-debit service (automatic withdrawal of funds) from the bank for savings / investment. So, you don’t have the opportunity to spend it first.
6. Do Not Have Emergency Funds
Have you ever experienced an incident that made you have to spend money outside your plan.
For example, a vehicle suddenly breaks down, or do you fall ill? If you don’t have an emergency fund, get ready for financial difficulties.
Apart from savings and investment, financial planners also recommend that you have an emergency fund. The ideal amount, at least 3 times our income for a month.
7. Do Not Have Insurance
Many people are not aware of the importance of insurance for personal finances. In fact, insurance can be a protector that keeps you from bankruptcy.
For example, you have a traffic accident. Besides you were injured, your car was badly damaged.
If you have car insurance, the financial burden you experience can be much lighter. You can claim car insurance to cover the cost of damage to your car.
However, if you don’t, you will have to bear multiple burdens. Besides having to pay for your own medical treatment, you also have to spend money on repairing vehicles.
8. Minimum Payment for Credit Card Bills
Credit cards do provide many advantages for their owners. However, many people just can’t take advantage of the benefits of credit cards properly.
Worse yet, most people only pay a minimum of their credit card bills.
However, you must know that paying a minimum for a credit card bill makes you have to pay interest.
9. Not Plan for Retirement
Many retirees are forced to lower their standard of living because their income is not sufficient. This problem is the result of a mistake in how to manage personal finances when young.
Most of the younger generation only think of living for today. In fact, when you are not productive later, your income will be much reduced.
If you don’t prepare a pension fund or a source of passive income in the future, you can retire in a poor condition.
There you have it, tips and how to manage finances for beginners. Be careful in spending money so that you still have savings in the future, but don’t forget to have fun too.
Don’t get stressed out and you can’t even enjoy the results of your hard work.
In essence, always pay attention to the flow of money in and out, you spend money on anything, and don’t forget to invest in order to keep your assets in the future.