So, you are wondering how to rein in your spending and control your finances better. Managing personal finances is easy if you can enforce a certain amount of self-discipline. Hiring an accountant is not feasible; neither you have time to go through some esoteric volume on personal financial management.
Where to start?
If you want to control your finances and the spending spree
- First calculate your monthly or weekly net income. This is the final amount after you have paid all your taxes and other financial obligations. This is your entire personal income.
- Calculate all your monthly expenses. Make a note of all the small, even trivial expenditures. It could add up to become a big sum at the end of the month. If the total monthly expenses are way higher than your monthly net income, you are in trouble. You are in a losing struggle against mounting debts, bills and other dues.
- The only solution for this mismatch is find an additional source of income or get rid of a substantial portion of your expenses, which you may not prefer.
- Make a priority-wise breakdown of your expenses and find out how much percentage of your net income they constitute.
- For example let us consider the categories like mortgage, transportation, groceries, savings, etc. Let’s say that your mortgage and other loan payment takes up 40% of your income and your monthly transportation expenses about 20%, your food and grocery expenses say about 15-20% and a contribution of about 10-15% to your personal savings account. That leaves about 10% for any other unavoidable expenses.
How to turn things around?
However, even after following the above mentioned steps your financial state of affairs may not look good. But you can turn things around by effectively managing personal finances.
- To start with, try to reduce your phone, electricity and other bills. Get rid of all the unnecessary expenses like your movie channel subscription. Purchase food and other groceries from the local discount store. Make a list of things that you need to purchase. Mark the things that can be put off for later.
- Stick to a monthly budget. Start creating a special provisional fund for any expenses above your budget. Keep a watch on this amount and try to keep it within 10% of the net income.
So by following these guidelines and by streamlining your expenses, you can live within your means and contribute something to your savings account at the end of the month.