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Handling money is probably one of the most important aspects of adulthood and is also a rarely taught skill. As one gains independence things get more complicated. Rent, student loans, retirement accounts, bills and many other tricky forms of debt have to be in order to avoid stacking up debt or spending money recklessly. We consulted several financial experts and in this article we’ll give you a few tips for achieving a better handle of your money.
What do you want to do and how much money would you need for it? Life is complicate and if you don’t have set goals, making decisions about money is just going to be more difficult than already is. They way you reach that decision is entirely up to you. If you want to own a house you can’t be as careless about money as if you wanted to buy a motorcycle. Doing this will give you a better handle of your money.
Now that you know what you want to do, the next step is figuring out how much will you need to do it. Again, depending on your inclinations the amount will vary. A very wise and practical advice is creating an emergency fund, a small well of money for a rainy day. Saving 6 months worth of expenses is practical and that way you’ll have a safety cushion and feel safer while pursuing your goals. Having a plan and set short-term goals is an important aspect for getting a better handle of your money.
What is the most precious thing for you?, this is the type of question you’ll need to ask yourself. After all, most of us are individuals with limitations and there is only so much that we can realistically do with our limited resources. Make a list of priorities, your top priorities should receive more attention and effort. You can maximize your resources by avoiding the accumulation of debt, pay things on time. Only after you completed this and the previous steps, is that you can start saving for a particular project.
Tracking your earnings is an essential part of getting a handle of your money, mainly because, this way, you’ll understand you expenses better and know which ones among them are more or less important. Now, this can be a bit confusing, however, there are simple rules of thumb that will help you to get started. A good place to start is with the 50/15/5 rule, which says that 50% of your earning should go to essential expenses, 15% to your retirement account and 5% to your savings. Obviously this is not meant to be an universal rule and many variations exist, but still, you’ll never know which method to use unless you track your money flow for at least 3 months. Many budgeting apps exist and will make this whole process easier.
