As simple as it may sound, managing your finances on a daily basis can be much more difficult than it seems. While this may seem like a simple task, managing your finances can slowly become less important as more problems arise.
Let’s say you just started your first “real” job and now have a stable income for the first time in your life. You are probably confused about how to organize, invest and spend your money. In fact, controlling and managing your finances is not as simple as it seems. With so many important expenses to track, daily expenses and even emergency costs, it can be scary to manage your money. This feeling is normal at first, especially if you are new to the world of debt, credit cards and investments, or just personal finance. The first and most important thing to understand is that it’s never too late to become your own CFO. Take the reins, take the bull by the horns, whatever your scenario, you are the most qualified person to do the work.
Track your expenses closely
If you want to become your own CFO, you need to know what’s going on with your money. Where does it come from and what is happening with it? To do this, track your expenses daily, for a month, regardless of the amount of your purchases. Take note of all these purchases and make a list to find the average amount you spend per month. This will allow you to visualize your actual spending habits and see where you can reduce your expenses. If you do not know where your hard earned money goes, it will be very difficult to make changes or improvements. When it comes to your finances, ignorance does not make happiness. Write down and save all your receipts, you are the boss.
Make a budget
After following your finances for about a month, you will be in an excellent position to create a budget, realistic and adapted to your lifestyle. Expenditures and budgets are different for everyone, but there are still some essential costs that should be the basis of your budget. These are the expenses you have to pay, for example, housing, food, transportation and utilities. In general, these expenses are not negotiable, which means you probably will not be able to ignore them. However, what you can do is not to pay too much for. Are you spending too much money on food? Do you drive a car that is above your means?
Once you are certain to have enough room in your budget for all these necessary expenses, you can decide how much you want to put for other things. We are talking about paying down debt or saving money, which is just as important as your main expenses, especially if you earn enough money to live comfortably.
Then you can think of the entertainment. These are all things that you do not really need but you want. Just keep in mind that you do not need to spend all the money you have left, you may need it in a few months. It is always in your interest to have some leeway, in addition to your savings.
If you find that making a monthly budget is difficult, consider making a daily budget. This will allow you to have total control over your expenses and will prevent you from spending too much. You know the exact amount you can spend to keep up with your budget.
Develop conscious spending habits
If you want to be a successful CFO and increase your equity while having power over your finances, developing conscious spending habits is necessary. This includes being very strict about yourself, buying only the necessary things and matching the budget you made in step 2. Erratic spending for useless things is unacceptable from a director’s point of view financial and will keep you out of control of funding and success. Be smart when you make purchases, and ask yourself if this is something your accountant would approve.
Being your own financial president also means having to make financial decisions that will increase your funds in the future. CFOs do not let their money pick up the dust in a bank, but rather, invest in businesses or stocks in order to generate profit. This return will increase your income and allow you to invest even more next time, which is even more important. If you are not confident enough to make investment decisions, it may be worthwhile to delegate this task to a broker or accountant who can guide you through your investments.
Improve your credit
This can be done through a number of things, such as paying your bills on time and in full (or the minimum amount), repaying any outstanding debt as quickly as possible and not closing down your old repaid accounts. Achieving a good credit rating can allow you to take personal loans at relatively low interest rates. This includes mortgages and auto loans, as well as unsecured personal loans.
Any good financial manager will tell you that saving is a necessary part of controlling your finances. Having control over your funds is having money left over if something happens. For example, if you get sick or are suddenly laid off, you will have something to support you. Manage your finances should include a plan B, which should be one of your long-term savings goals.
However, it is also important to have short-term goals to stimulate your motivation. It can be a major purchase you want to make or even your next vacation.
Make good decisions for your future
When making purchases, whether for a car, a house or even furniture, you want to make good decisions that will be useful in the future, not just in the present moment.
For example, buying a new car in opposition to a used car less expensive. A new car will last longer and can still be resold in the future, while a used car already has the wear and tear of its former owner. Another example is the decisions you make regarding your credit card. Responsible use of your credit card can be difficult, but the effects of irresponsible use can haunt you for years to come.