Financial management tips

Journey towards financial independence

In today’s environment where more and more companies are aggressively coming up with various offers and services that promise high yields for your hard-earned money, it is easy to get confused and to harbor doubts about their guarantees. However, it doesn’t need a lot of financial acumen to lessen the risks and learn how to make money for you. Here are some guidelines on how to manage your finances better and wisely:

Force yourself to save

Instead of allocating what’s left of your money at the end of the month for your savings, you might want to put it “up front.” In other word, when the paycheck comes in, try switching everything around and take out a certain percentage right away for forced savings. This is the first, and usually most difficult step towards effectively managing your finances as you veer out from your “paycheck to paycheck” cash management system. As to how much money to save, try to find a comfortable figure that you can sustain, rather than aim for a higher figure that will force you to miss.

Simplify your expenses

Small expenses here and there will eventually add up to a lot. Expenses, if left unprogrammed,, are usually a big but unnoticed drain on our cashflow. Try to consolidate your expenses into two or three payment schedules in a certain period. That way, it will be easier to focus on paying off your expenses because you will be looking at fixed dates instead of free dates. An incidental benefit of this is that you actually will have a clearer picture of how much you spent, and when you have to pay for them.

Prioritize your spending

Try to put order in your spending structure. Define your spending into a pyramid and identify which items deserve to be put on top. Spend accordingly. An insight given by a young man who realized that he and his wife were spending much more than they were earning should define the way to think about spending – “if we’re smart enough to earn more money, we should be smart enough to know how to spend it.”

Use your card deliberately

Credit cards have certainly been one of the most innovative financial tools around. They can now be used to pay most utility bills, your child’s tuition, even to top up your cellphone loads and toll free e-passers. By simple enrolling in a utility bills payment program, charging yr bills to your credit card becomes a straightforward activity devoid of all the standing in line. Charging tuition fees can be done in several ways. One is to first pay it in cash and then fill up the appropriate form to charge it to your card. Of if the school has a credit card payment facility, you can just charge it right away. You can treat your credit card as a digital wallet when t need arises for you to top up your cellphone loads. That certainly spells convenience. Out of cash? Credit cards can also offer a quick fix for those tight-cash days. Cash advance facilities are now being made available to an even widening credit card market base.

However, the purchasing power given to us by credit cards often become expense blinders as we indulge in impulse buys when we need to do it least. Credit cards, properly harnessed and deliberately used will strengthen and enhance our cash flow. As an exercise, try computing how much of your credit limit will be left over if buy that latest hand-held Bluetooth capable device, on a 24-month deferred payment progam. Then add the interest charges over the entire 24-month period as well. However, if you really need that laptop for your business and that the only way for you to get it is through your credit card, then go ahead. The laptop becomes an investment, giving it a rate of return to offset the depreciation. If you do most of your purchases through credit card, it will also provide a certain degree of manageability by consolidating your expenses.

Start broadening your investment horizon

High net worth individuals didn’t get there by burying all their coins in the sand. Right now, there is a wealth of investment choices and the list is constantly growing. Gone are the days when the only investment alternatives were the time deposits and money markets. Now there are hedge funds, treasury bills, commodities and futures trading, derivatives, currencies. But keep in mind that not all investment alternatives are created equal. Some offer higher yields than others, and some are riskier than others. Some things to keep in mind venturing into the investment horizon are:

1) Seek the advice of the professionals. They usually are in the best position to identify trends and recommend a program of action.

2) Avoid putting all your investment eggs in one basket.

3) Only go for an amount of risk you can handle. Every person’s risk appetite differs, and some can handle higher risk than most. But if the amount of risk will cause you sleepless nights, that is often a good indicator that your risk level is already too much.

4) Try investing in things you have personal interest in. It is always good to have a personal knowledge and interest in the investment vehicle that you are using in order to manage your finances wisely and better.

These are just some of the tips and things that you should on how to manage your finances wisely. By taking these important lessons into heart, you are guaranteed that you will be successful in your financial management endeavors. Eventually, you’ll be on your journey towards financial independence without the worries of a financial crisis or any financial-related problems. Learning how to take care of your finances well takes time, thus it is suggested that you apply these important tips to your everyday life in terms of your finances.   If others can do it, you will too.