Financial management seems very daunting. Lack of patience and calculations to track each moment expense seems like climbing a mountain. Having enough money for utility bills, food, travel and other recurring expenses is fundamental to live life independently and comfortably. Lashing out money will leave you with nil savings and tie you up with a predatory debt spiral.
Many borrowers fall into debt because of inability to pay back and unorganised finances may have accounted for it. Financial experts suggest that you should be frugal and emphasise the build-up of emergency cushion to avoid taking out loans for recurring expenses. Small loans such as text loans from direct lenders mainly aim at helping borrowers who need money for unexpected expenses such as medical emergency and job transition. You can easily avail loans with no credit check, but repayment can be difficult if you do not organise your finances. Here are some useful tips on how to organise finances.
Create a budget
To control your spending, you must know how much is in and how much is out. Note down all of your income sources such as monthly salary, rental income, dividends and interest on investment and income from side gigs. Then, you note down all of your expenses. Add in even a tiny expense – as you pay for it out of cash. Add up them to know the total monthly expenditure. Whether you have left net worth or not, your primary job is cutting down on expenses to have more money available for a rainy day. Budgeting will help you be more in control of your spending.
Put bills on auto debit
Do you know that timely payment of utility bills also help improve credit score? A good credit standing will allow you to apply for a guaranteed loan at lower interest rate. It is not surprising that due dates slip through the cracks due to busy schedule. Why not put them on auto debit mode? As the due date approaches, money will automatically be deducted from your account. This saves time as well as preventing you from paying late payment fees.
Build emergency cushion
Having an emergency fund is important even if you can take out a loan for unexpected expenses. Do not forget that small loans come with very small amount of money, which means if you needed big money, you would have to dip into your savings account. The rule of thumb says that you should set aside at least 10% of your monthly salary. It should be three-month worth of your living cost. Many people fail to prevent themselves from dipping into it to fund their habits. The best way to avoid it is to link your savings account with deposit account. Set a particular date, for instance, paycheque dates, so that money could automatically transfer from your salary account to savings account. This will quickly build up your emergency cushion.
Set aside for your mortgage and other debts
Whether you have a small debt or a mortgage, you will end up paying late payment fees and interest penalty if you fall behind repayments. Financial experts suggest you making a budget to know your net worth because you will pay off all of your debts out of it. Make sure that you could pay down mortgage instalment through it. If your net worth falls short of your debts, you should cut back on your expenses to add it up or look for more opportunities to earn money. Give priority to your debts to avoid paying late payment fees and interest penalties.
Set a financial goal
To get your finances organised, you must know why you are doing it. What is your target? How will it benefit you? Are you intending to save for retirement? Are you saving to build an emergency cushion? Do you want to pay off your credit card bills? Are you saving for a car or an international trip? You must know that why you are doing it and how you are going to benefit from it. Unless you have a particular reason to set aside money, you will not be able to continue to do it.
Track your spending
At the end of every month, you should track your expenses to ensure that you have not spent more than your budget. Find out where your money goes. Were your expenses justified or did you spend on incidentals? Have you been able to set aside money? Are you close to your financial goal or not? Ask yourself all these questions at the end of the month.
The bottom line
When it comes to financial management, you should be very careful with your spending. The more frugally you spend, the better it is. Try to set a financial goal and stay stick to it.