The process of managing your finances is a very important one. Wondering how so? Well, let’s take a walk down the memory lane.
Do you remember the last time you had a bunch of money in your pocket? You were strangely comfortable, weren’t you? There weren’t a lot of debts on your hands and you could spend freely.
However, as time went on, you started using the money and, before you knew it, it was all gone. This is why you have to keep track of your money. Nobody will accept “abeg” as payment for services rendered or products purchased.
In this piece, we’ll share with you a four-step guide to managing your finances. They are:
1. Understand your income and your expenses
This is the very first and the most important step. You need to know where your money comes from, how often it comes, what quantity you get on average, etc. When you figure all these out, you need to calculate your essential expenses.
Have you started paying bills? Calculate how much it costs you to pay all of them in a month, a quarter, or even a year. Crunch those numbers and get a calculator if you have to. If your income isn’t fixed and your bills aren’t either, you can do a rough estimate. However, it’s wise to estimate your expenses slightly higher than they actually are.
2. Analyze your spending habits and cut out any negativities within
Do a quick background check of how you spend your money. Apart from bills, transport fare, and other essentials, what do you spend on? Is it important or is it a luxury? Additionally, are you an impulsive buyer? Ask yourself these questions.
If there are any nonessentials, depending on how lean your income is, you might want to strip them completely. If you are an impulsive buyer, take measures to stop yourself the next time you see a shiny wristwatch or anything that catches your fancy. The benefits are worth it.
3. Create a budget
This is the third major step. After understanding how much you have, how much you spend and what you don’t need, you must create a budget. Allocate a certain amount to feeding, transport, fueling (if applicable), etc. Don’t forget savings either. Draw up this budget as it would help you plan where and what to put your money into.
4. Follow through
No matter how good it looks, don’t go off buying something outside your budget. Those types of decisions often have ripple effects that may leave you sitting on the floor in your room on a Friday night drinking garri with half a sachet of water.
Money can be so intoxicating sometimes that managing it might prove to be a bit difficult. However, you must remain consistent and disciplined. Practice a little delayed gratification, and pretty soon, you’ll find your finances neater than a newly polished shoe.