How to Manage Your Finances

Financial management isn’t a strong skill for a lot of people. In fact, it’s safe to say that most people struggle with their finances at some point — some for their entire lives. This is true both for individuals and business owners. Fortunately, it doesn’t have that way. With the right knowledge, resources, and discipline, anyone can improve their financial wellbeing, no matter what their current situation.

One of the main ways to turn your finances around is to make a plan and stick with it. And this doesn’t have to be difficult. It also doesn’t have to look like someone else’s. Every situation is different, as is every lifestyle. The key is to find the methods and keys that work for you and do your best not to stray from it. But in order to discover those, you’ll need a starting place. Here’s what to do.

Evaluate your current financial situation.

Now is the time to get brutally honest with yourself about where you stand financially. This isn’t always easy, but it’s completely necessary in order to get to a better place. Start by assessing your net worth. This is a simple formula of assets minus liabilities (or debt). Obviously, the higher this number, the higher your net worth and the better your financial position. But don’t beat yourself up if you have a negative net worth. It’s not that uncommon. However, make it a point to grow your net worth from here and you’ll have a more solid financial future.

Next, calculate your debt-to-income ratio. To do this, you’ll do this by taking your total monthly debt payments and dividing it by your monthly income. Lenders use this number to determine loan amounts and interest rates, and they recommend keeping this number under 30%. It’s also a big part of your credit score and it can give you a good idea of whether you’ve got your finances under control or not. If that number starts climbing above 30%, you’ve got too much debt.

Once you know where you stand financially, it’s much easier to determine your next steps. Are you pretty sound, making more than you spend and growing your savings? Or are you spending more than you make and need to make a change? With a clear financial picture, you should be able to adjust your life accordingly.

Learn to budget.

Budgeting is probably the most important thing you can do, especially when you’re trying to get your finances under control. People who are good with their money usually know where every dollar goes. And there are lots of ways to budget. A popular method is the envelope method, where you designate envelopes for certain expenses and put only the amount of money you plan to spend on those expenses. Of course, to start, you’ll need to figure out those amounts ahead of time, but many people find it helpful to use trial and error to find the amounts that work for them.

Downsize while you grow your net worth.

If, after you’ve evaluated your finances, you’ve discovered that you spend more money than you’re bringing in, it’s time to make a drastic change. Of course, this means different things for different people. Some people choose to downsize everything, selling their massive homes to move into something more affordable. A good place to start for almost anyone, however, is learning to buy used cars.

Experts say a car depreciates about 10% after you drive it off the lot. In other words, the person buying a brand new car is taking a huge hit on the price. So, if you buy even a barely used car, you could be saving a fortune. And buying a used car won’t change your lifestyle like buying a smaller house or giving up expensive memberships. You can probably still drive the same type of car you’re used to, but with much smaller payments. Many people even find that they’re able to drive a nicer car if they buy a used because they don’t have to settle for the most basic package in order to afford it.

Financial Management Tips for Seniors

As a senior citizen, you may have a lot of concerns about managing your finances after retirement. Many people at this age are on a fixed income with no way to bring in extra money. If this is the case for you, it’s especially important that you learn to budget very well and find ways to lower your living expenses if necessary.

One of the best ways to stay on top of your money situation is to pay off most of your debt before you retire. This is especially true for revolving debt such as credit cards that rack up the most interest. And if you can pay off other debts like car payments and your mortgage, you might have a lot less stress after retirement.

Another thing to consider is where you live. If you live in an area where things are more expensive, it might be a good idea to relocate if at all possible. It’s for this reason that many seniors move to Florida. Among the many reasons to move to Florida is the lower cost of living in some areas. They also have very low tax rates, excellent health care, and lots of active adult communities in most areas.

Financial Management Tips for Small Business Owners

Small business owners often bootstrap their companies and cut financial corners wherever they can. And while this is commendable, there will probably come a time when you will need to hire professionals in some areas. For one thing, when you start taking credit card payments, it’s necessary to thoroughly reconcile credit card activity. With smaller volumes, it’s possible to do this on your own, but when your business starts to grow, it might be necessary to hire someone to do this for you.

Reconciling your credit cards manually might be possible in the beginning when you have a handful of charges. However, as your sales volume grows, you’ll likely become overwhelmed by the process. A service that offers automated credit card reconciliation can help you automate your processes and give you full visibility of your credit card charges and fees.

Financial Management Tips for Single Parents

The struggle for single parents is unique to other people because they’re often the sole providers in their households. This means they don’t have the safety net of a spouse’s income should something happen to theirs or if they get behind on their bills. For this reason, it’s especially important to learn some valuable financial management tips to help you out. First of all, make savings a priority. An emergency fund of $1,000 is recommended to start, but grow this whenever you can. Secondly, learn to budget.

Many adults have the same priorities, such as maintaining a work-life balance, improving body confidence, and saving for retirement. However, single parents often have to adjust their priorities to make things work. The key is to figure out your top priorities and find ways to improvise. You might forgo the gym fees and opt for at-home workouts or jogs at the park in order to spend time with your children and save money. Or you might cook and freeze healthy meals weekly instead of hitting the local drive-through after a long day at work.