It is common that we always have problems with our finances and this is because we do not organize ourselves effectively, so today we want to help you improve this part. Implementing a personal finance plan.
A personal finance plan or personal financial plan should be unique for each person. There is no one correct way, but there are some guidelines to keep in mind when creating your own.
In short, the concept of personal finance refers to what you do with all the money you earn or receive.
Here are five fundamentals for managing your personal finances:
1. Reflect on your goals and the purpose of finances
The purpose of keeping track of your finances is to delve into your own needs, wants, and dreams and then commit to working toward them.
So there is no longer any doubt about the importance of analyzing personal finances before spending. It is essential to have a personal financial plan to be successful in our life.
To budget and get started with your plan, you need to understand what you really want in the short and long term.
2. Evaluate your current financial situation with a personal financial plan
Now that we’ve done some planning, it’s time to take action.
Before you can build a personal finance plan that really makes sense for your life and your goals, you need to understand the situation you currently find yourself in.
This step is essential in your personal financial education and planning, so don’t skip it.
This starts with a simple analysis of a couple of things:
Cash flow, or «money in versus money out»: how much money you earn and spend each month.
Net worth: the money and assets you have now minus what you owe in concepts such as credit cards, installment payments, loans …
3. Control loans and debts are key in your financial education
If you have debts (credit cards, mortgages, loans, etc.), make it your goal to pay them off as quickly as possible. The faster the better, because you will pay less interest. This in turn means that you will keep more of your money in the long run.
You see, financial control begins with spending control, so get to work! With a little effort, you can.
4. Establish (and comply with) a budget that ensures financial control
Setting and sticking to a budget is the most powerful step you can take to ensure good financial health. If so, we ensure that we are working towards reaching goals, and setting a tangible number to follow will help you to be responsible over time.
Now that you know what your cash flow and debt are, you have a better idea of what your budget should be. And I repeat it once again: To control finances, you have to control spending. There is no other way.
5. Try to save money every month
Every good financial advisor recommends creating an emergency fund in your personal financial plan. Ideally, this fund covers at least three to six months of expenses in case you lose your income.
If you have to face significant debt, it may seem high to save so much money. Totally understandable.