Household financial responsibilities are widespread, creating challenges for those striving to stay atop their finances. Unfortunately, however, personal finance is not offered as part of a young person’s educational curriculum – unless it is specifically sought-out. As a result, money management is a learn-as-you-go prospect for most personal financiers, who gain savvy with each financial interaction.
Monetary matters are different for each person, reflecting a range of affluence and earning power. But despite the particulars distinguishing each person’s financial landscape; universal lessons do apply – giving even the most inexperienced money managers a leg-up on their personal financial responsibilities.
Financial success relies on many different strategies, covering everything from frugal grocery shopping to cost-efficient energy use – each contributing to prosperity and financial security. In addition to using specific, focused efforts to reduce costs, adopting universal moneywise principals also leads to positive financial outcomes at home.
Use these three important lessons to guide spending decisions and protect your financial health.
Distinguish Needs from Wants
Spending opportunities arise daily, so discretion has a significant impact on your financial fortunes. In order to avoid unnecessary spending, each purchase should be evaluated, before committing. Instituting a self-enforced waiting period ensures purchases are not made without reflection. By assessing each potential buy you’ll define the line between wants and needs, protecting you from ill-advised purchases.
Semantics makes it hard to be absolute about wants and needs. After all, designer clothing meets a need, despite its extravagant cost. To effectively apply the principle you must build-in a measure of common sense. The objective is sidestepping unnecessary spending – or at least living within your means. Spending money on needs like food, shelter, and clothing is easily justified, because you cannot go without these items. Depending upon where you live, a car might be considered a need, but at the same time; many people live without personal transportation. If you find yourself justifying too many needs, it may be easier to control spending by focusing on money devoted to wants.
Wants result in discretionary purchases, which are among the easiest to reduce. Entertainment spending, for example, can be controlled with budget discipline, while expenses like housing are typically somewhat fixed. When in doubt, put all your discretionary spending categories under review, making adjustments to rein-in spending.
Make Responsible Credit Decisions
Debt weighs heavily upon individual finances, so controlling borrowing and credit use are essential to financial stability. For starters, you should only ever borrow the amount you need, limiting your use of credit to essential circumstances. Second, your credit options should be evaluated thoroughly to avoid overpaying or using the wrong type of financing. With resources available online, comparing everything from loan alternatives to mortgage products, it is easier than ever to make side-by-side evaluations – without obligation or pressure from lenders.
Once you have a stake in the credit market, whether through student loans, credit card balances, mortgages or other obligations, it is important to manage your responsibilities, without fail. Your credit rating follows you through life, so establishing a sturdy history of successful interactions and protecting your credit score are essential pursuits.
Follow Your Money
Unless you take proactive steps to account for your money, it can be difficult to protect your personal financial health. For the best results, start with a realistic budget, designating categories you can easily track, to see firsthand where your money goes. With a handle on daily, weekly and monthly cash flow patterns, it is easier to plan ahead, helping you make strides toward your long-term financial goals.
In addition to the portion of your take-home pay at your disposal, it is important to maintain thorough understanding about taxes. Although some tax matters are out of your hands, making prudent moves can result in lower taxes. Recognizing these savings opportunities is like putting money in the bank, so keeping a close eye on your money naturally fosters positive financial outcomes.
Universal financial lessons serve as a foundation, from which individuals customize their personal money management strategies. Making wise credit choices, tracking your cash flow, and devoting resources to the things you can’t do without are three essential tenets of a viable long-term approach – use them to reinforce your financial security.