A healthy way to manage your finances is one of the solutions to keep your financial condition stable until the end of the month. Eventually, the following financial management will create a balance between your desires and needs. Interesting, isn't it? Well, without further ado, let's check out the tips for managing finances below.
Personal Financial Management
Every day, we are always faced with necessary expenses. Starting from electricity bills, water bills, to online shopping entertainment on our favorite e-commerce platforms.
The funds allocated for each of these things can be better managed by understanding how to manage personal finances.
Here are more details on general tips for managing finances.
1. Differentiate Needs and Wants
Before properly planning your monthly finances, first understand which things are needs and which are wants.
- Basic needs are all the essential goods or services that need to be fulfilled. Some examples are food and education.
- Wants are products or services that are additional and only fulfilled for personal pleasure. Examples include shopping for lifestyle and hobbies.
By distinguishing between the two, managing finances will be easier because you know which ones are obligations and which ones are just for personal satisfaction.
2. Create a financial plan
The second step you can take as a way to manage your personal finances is by creating a financial plan. A financial plan can be made by organizing monthly expenses and income, making it easier to monitor.
Even if you have only a small amount of money in your savings, a financial plan needs to be created. The impact will be even better if you can implement this step early on.
3. Use credit cards wisely
Using credit cards recklessly can make you more impulsive and lead to long-term debt consequences. Therefore, reconsider the use of credit cards for your various needs.
4. Investment
Another personal finance management method you can apply is investing. Apart from stocks and properties, there are now many other financial technology innovations such as mutual funds that you can choose for investment.
5. Establish an emergency fund
Setting aside a small portion of your income is also important, as this step can be taken as a way to manage your personal finances. There is no set amount that needs to be allocated each time. Just make sure that this emergency fund can be utilized when there is an urgent need.
6. The 50/20/30 rule
Another alternative method for monthly financial management that you can apply is using the 50/20/30 rule. This scheme was introduced by Elizabeth Warren, an economist at Harvard University.
In general, the 50/20/30 rule concept teaches you to divide your financial ratio according to the specified percentages.
- 50% - Essential needs
- 20% - Savings
- 30% - Wants
This concept teaches you to manage money ideally for primary needs, desires or hobbies, and saving for the future.
7. Pay later and cashback
Another trick that you can utilize as a way to manage your monthly finances is the "pay later" and cashback features. Currently, almost all e-wallet and e-commerce platforms offer "buy now, pay later" facilities and cashback.
Try to maximize the use of both features wisely as one of the tips for managing your finances, so that you are not burdened by your expenses.
How to Manage Household Finances
Managing household finances is essential to optimize resources and avoid overspending. The following are ways to manage household finances that can be applied together with your family.
1. Monthly shopping plan
Just like fulfilling personal needs, planning monthly household needs is crucial. Prioritize essential needs first in the budgeting process. For example, consider the following sample monthly expense list:
- Groceries
- Electricity and water bills
- Other household equipment
- Installments and dues
- Additional needs (Wi-Fi, recreation, etc.)
2. Cook and eat at home
Cooking and eating at home are highly effective in reducing family expenses. Just think about it, dining out in a restaurant can cost around 50,000 per person, while that same amount of money can cover the entire family's meal needs at home.
3. Saving and investing
One way to maintain stable household finances is by saving and investing. If you have a steady monthly income, it's advisable to set aside a portion for savings.
In addition to saving, you and your partner can also consider investing. This step can be a suitable way to prepare for the future.
4. Insurance
Applying for insurance is another essential step in managing household finances, especially if you are married and have children. With insurance, certain risks that may occur won't heavily burden your expenses and family.
5. Additional income
Finding a side job can be an easy way to manage household finances. There are various alternatives you can explore, such as starting a home-based business or engaging in online businesses with your partner.
How to Manage Business Finances
A business is inevitably connected to its funding and management. Therefore, it is important for entrepreneurs to know the proper way to manage their business finances according to their industry.
1. Budgeting and financial reports of the company
The first step in managing business finances is creating a budget plan. The budget plan can be made by clearly projecting the sources of income and expenditures of the company.
In addition, the company's financial reports can also be a way to manage business finances. All evidence related to income and expenditures can be included in the financial reporting.
By doing so, the chances of the company's expenses becoming inflated are significantly reduced.
2. Loans or company debts
It is not impossible for a business to take out loans or debts. However, this can be a disaster if not managed and monitored properly. As a way to manage business finances and keep them on track, it is recommended to regularly check whether the company's loans and debts have been paid off or not.
3. Emergency funds
All things come with risks, which is why having emergency funds is important for a company. This particular budget allows you to continue running the business even in difficult situations.
Emergency funds can be obtained by allocating funds from the company's income sources.
The Importance of Financial Management
What are the benefits you can gain from successfully implementing effective personal financial management? There are certainly numerous benefits, which are listed below.
- Safe cash flow. Monitor your finances directly, so no income and expenses are overlooked.
- Identify financial errors. Know the problems that occur when managing finances as material for future evaluation.
- Peaceful retirement. Personal financial management can help you prepare for your old age.
One crucial thing to note when trying household, personal, or business financial management is consistency. By consistently applying it in your daily life, this method will be very beneficial for your future. Hopefully, it's helpful!
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