Sadly, today’s rather dismal interest rate offers and a roller-coaster economy have taken the enthusiasm out of many people for the traditional savings account and conventional wealth-creating investing. Moreover, recent surveys have indicated that many people, up to 91 percent, opt to go the route of self-management in their personal finances.
Covering some of the basic things to do and the ones to avoid, our article below helps lay a foundation for sound personal financial planning.
SET UP A SAVINGS ACCOUNT OR PETTY CASH FUND
– Eagerly waiting for an upturn in the economy, along with higher interest rates, many people have shifted from a savings account mentality to one of simply creating an emergency fund or petty cash fund to keep on hand for urgent needs.
– Typically, set at about three to six months of living expenses worth, some people even opt to keep their money in their homes and not in financial institutions such as local banks and credit unions.
SET GOALS AND MONITOR THE PROGRESS
– Short-term goals reachable by the end of the year are fairly easy to achieve. On reaching them, enthusiasm for managing personal finances increases significantly. Having completed the short-term goals, you’ll more eagerly reach and fulfill the mid-term goals; moreover, eventually, you’ll reach your long-term goals as well.
– Writing the goals down and checking them off as they are completed, goes a long way in managing your finances; moreover, it’ll help in building your self-confidence as well. That being said, one of the first short-term goals should be setting up a budget–and sticking to it!
SAVE, DON’T BORROW
– There’s absolutely nothing like saving for an item and paying cash for it. While not always possible, it can be done easier than you think. If credit must be used, then choose the loan with the best payment terms possible, like the one with lowest interest rates.
– Do not live off credit and pay with cash as you stay within that budget you drew up. Putting away your credit card when you browse through the Internet or watch a shopping network on TV does wonders for your personal finances.
– Don’t make the mistake of assuming that you’ll get out of debt by making a minimum payment; the interest only grows larger if you do. Adding more money to the payment, on top of the minimum, enables your balance to decrease faster.
– Buying something, when you have no need of something, is a sure short-cut to financial insolvency. As a rule, only buy something when you need it.
In today’s volatile economic environment, learning self-control, setting goals and putting some money away as an ingrained habit, all form a foundation of good personal financial management–and prosperity. Choose wisely.
David Milberg is a financial expert and an investment banker from NYC.