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How to effectively manage a personal budget

Financial literacy rules help you manage your budget – spending your earnings rationally and multiplying your capital. Depending on your monthly income, you can build up savings or regularly be left with an empty wallet and in debt. The good news is that it’s never too late to learn the basics of financial literacy.

To make it easy, we’ve put together an easy-to-follow guide to help you learn the basic rules of financial literacy and apply them to your life right away.

What is financial literacy?

Financial literacy is the ability to manage money wisely and achieve your financial goals. Being financially literate means buying and spending wisely, planning your budget, and saving to ensure an acceptable standard of living for yourself now and in the future.

How to Improve Financial Literacy: Practical Advice

To implement the principles of financial literacy, you need to take small steps in practice regularly and purposefully. We’ve divided the tips into 5 economic areas: income, expenses, budget planning, Savings and investments, and relationships with the bank – pump up each one:

Income

Income is the main component of a financial plan. Here are a few tips to help increase stability regarding income.

  1. Find multiple sources of income. A stable job with a paycheck is good, but it’s better to minimize dependence on one employer. Make at least one additional source of income: you can develop a personal blog, open a small business or engage in investments.
  2. Build up passive income. If possible, it is worth investing in those tools that bring profit without your active participation. Passive income is especially relevant in retirement when you want to save strength and health.
  3. Take care of your health. There isn’t much money, but it’s only a means to achieve financial goals and well-being. Don’t sacrifice your physical and mental health today for a phantom benefit in the future. Otherwise, you may not live up to it.

Expenses

You need money to spend it. We tell you how to do it rationally:

  1. Spend no more than you earn. Better yet, spend less. If your balance tends to zero every month, you can’t create savings for the future.
  2. Save, but don’t go overboard. The point is not to give up quality things and comfort but to prevent impulsivity and shopping “for the sake of shopping.”
  3. Do not borrow. Try to plan your purchases so that you can save the necessary amount and cover the total cost on your own. And if the price is too high – analyze why you need the thing or service you can’t afford and if there are no cheaper analogs.

Budget planning

  1. Make a clear financial plan. Setting aside money without a specific goal is difficult. Formulate what results you want to achieve, write down the methods, calculate the possibilities of their implementation in figures and set realistic deadlines. You’ll be able to move towards the planned goals much faster.
  2. Choose a convenient way to manage your budget. Some people like modern mobile apps with automatic checks and bank transfers; others prefer to write everything down in a diary. Either option is good – it’s vital to pick the most convenient one.
  3. Keep your budget systematic. Make a habit of entering expenses and income in the evenings every day or once a week on Sunday; the main thing is not to miss anything and remember every cup of coffee you drink.

Savings and investments

You can’t achieve financial well-being without savings. You can save money in different ways: in cash, on a bank card, in deposits, or investment instruments – let’s talk about smart savings.

  1. Save before you spend. Make a habit of immediately transferring at least 10% of your earnings into the piggy bank. If you save at the end of the month, you might have nothing left in your balance.
  2. Savings for good. For example, if you are a student and need educational materials, then look for free essay writer platforms, libraries, online courses. If you like to travel, then keep track of low-cost tickets. These kinds of tips can help you save a lot of money.
  3. Put money into circulation. Keeping money in cash or on a card can be convenient, but every year it depreciates due to inflation. Saving money in bank deposits will help preserve its value, and wise investments will help multiply your money.
  4. Learn how to invest. Without accurate preparation, throwing yourself into the abyss of stock exchanges and futures is not worth it otherwise. You risk losing everything you’ve earned. Learn the basics of investing in theory first, and then take your first steps into the stock market. 

Relationship with banks

  1. We won’t demonize banks – sometimes you can’t do without borrowing money. Attention and our advice will help you not to ruin your credit history.
  2. Avoid consumer credit. It’s hard to buy a car or an apartment without a bank, but it’s better to avoid recognition for a new iPhone or a wedding. The longer you pay back the loan, the more you overpay, so if you can’t do without a loan, try to repay the entire amount in a short time.
  3. Close your credit cards. At first, pay off the debt faithfully during the interest-free period, but you forget or can’t pay on time one day. Then the credit card will show its insidiousness: you’ll have to cover the amount owed and interest for each day of delay – even a tiny amount of forgotten debt will cost you a pretty penny.
  4. Carefully study the terms of the loan. Analyze your competitors’ offers and make out all of its provisions before signing a contract with the bank. If you find it challenging to understand independently, consult a lawyer.

Final thoughts

Financial literacy is one of the essential qualities of a modern person, which should be developed from childhood. Regular accounting and budget planning creating and increasing savings will help achieve financial stability and ensure a comfortable future for yourself and your family and for more interesting ideas visit at IITSWEB.

IITSWEB
IITSWEBhttps://iitsweb.com
IITSWEB is the Chief Business Development Officer at IITSWEB, a Magento design and development company headquartered in Redwood City, California. He is a Member of the Magento Association and an Adobe Sales Accredited Magento Commerce professional. Jan is responsible for developing and leading the sales and digital marketing strategies of the company. He is passionate about ecommerce and Magento in particular — throughout the years his articles have been featured on Retail Dive, Hacker Noon, Chief Marketer, Mobile Marketer, TMCnet, and many others.
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