Whether you’ve just started earning a stable income, or you’re however many years down the line in the working world, keeping track of your personal finance is crucial to ensure security in life. Here are 5 personal finance tips you can implement today.
- Track Your Spending
First, it’s important to do a self-audit on your financial income and spending. Take note of your cumulative monthly earnings, your monthly commitments and track all of your expenses. Laying out all the numbers helps you identify spending patterns and paint a clearer picture on your financial standing.
- Plan Your Budget
Once you have all the ‘numbers’, it’s time to budget. The most commonly-followed budgeting system is the 50-30-20 rule:
- 50% goes to your needs. This includes rent, loan payments, bills, groceries and other necessities for you to function.
- 30% goes to your wants. It is anything that can be categorised as non-essential. This can be your Netflix subscription, fancy dinners, new clothes – basically items or purchases that serve as indulgence. (It is advisable to reduce this portion if your needs exceed the 50% threshold).
- 20% goes to your savings. This can mean investments, retirement funds and so on. This is a portion dedicated for your future – it’s an investment in the long haul. However, this is especially useful for when you are in an emergency.
- Credit Card: Good or Bad?
The truth is, it depends on the type of person you are. Having a credit card means an additional responsibility to be very mindful of your spending. It can be a powerful tool that helps you build credit score for easier loan approval down the line, and it offers a plethora of benefits in the form of rebates, rewards and more. However, failure to pay your debt can incur a penalty in the form of high interest rates. Opt for a credit card when you know you’re financially responsible!
Ensuring you are subscribed to an insurance package – for health and life, can provide a wonderful safety net down the line. You need to always be prepared for unfortunate circumstances – and if you find that you don’t have enough funds to pay your hospital bills, you’re going to be thankful your insurance is there to back you up.
- Plan For Retirement Now
It can be surreal to think about retirement, especially if you’ve just started working – but contrary to the saying ‘life is short’, it’s actually a long, long game and you must always be prepared. Whether it be a retirement fund, or long-term investments, any extra pennies should always have the future into consideration. Growing old can seem like a long way to go, but it’s always good to look towards the future.