Finance and financial management are vital aspects of any business, corporation or society. Without them, we would not be able to buy our homes, pay for goods or services and grow our businesses.
Financial managers need to make forecasts about funds needed in the short and long run. They also need to determine the right mix of debt and equity to help them fund their operations.
1. Make a Budget
Whether you are in debt or trying to juggle your finances, budgeting and financial management are key to success. It allows you to plan and track your money in a way that will allow you to save and invest wisely.
The first step in budgeting is to make a list of your monthly expenses. This should include fixed expenses like rent, utilities and car payments along with variable expenses such as groceries, gas and entertainment.
Next, you should categorize your spending according to your financial priorities. This will give you a good idea of how much to put toward savings and debt, as well as other areas where you can trim costs.
Creating a budget isn’t always easy, but it can be rewarding when you start to see how it changes your finances for the better. Motivation is critical, so try to remind yourself why you are budgeting and how it will help you achieve your financial goals.
2. Create Savings Pots
If you have a lot of money and you want to save it, create multiple savings pots. Creating these pots will help you manage your finances better and get you on track for saving more money in the future.
These can be used for everything from holidays and groceries to saving up for a car or new home. By setting up a separate pot for these, you can easily keep track of how much you save each month and avoid spending too much on extras that you don’t need.
Some banks include a pot or space within their current account that allows you to set up a saving pot without actually transferring the money to another account. These can be a useful tool if you want to increase your savings pot but don’t feel comfortable using a current account.
It’s also worth exploring alternative options for your savings, such as challenger banks. These can be a good way to maximise your savings and earn more interest than traditional bank accounts offer.
3. Pay Off Debts Early
Paying off debts is a great way to boost your financial confidence. It also gets rid of big interest charges, which can cause your debts to spiral out of control if left unchecked.
While paying off debts is a marathon, not a sprint, there are certain strategies that can help you do it more efficiently. These include a budget, a savings goal and the debt snowball method.
With a budget, you can keep track of all your income and expenses. This allows you to identify any areas where you can trim back on spending or put extra money toward your debts.
A good rule of thumb is to have 3-6 months’ worth of living expenses in a savings account. This will protect you from unexpected emergencies, such as a job loss or pay cut.
4. Develop a Savings Goal
Developing a savings goal can help you manage your finances better and build up confidence when it comes to saving for larger purchases. It also can be a good way to save money for a big event, like an overseas trip or a wedding.
First, determine what your savings goals are–and what they mean to you. Ideally, they’ll be grouped by needs and wants, in order of importance.
Once you’ve done that, write down your savings goals and create a plan for reaching them. You can even use an online tool to automate the process and track your progress.
Depending on your goals, you may need to allocate different buckets of money. For example, you may have a long-term retirement goal and a short-term emergency fund goal.