Learning how to manage personal finances has become more important due to the present economy. Individuals need to be in control of their finances. This will help you handle financial emergencies should they arise. Below are some tips from an experienced CPA on how to avoid falling into a financially stressful situation.
Tip #1: Start Out With a Little “Self Control”
This can be interpreted in a number of ways. Successful financial management requires a great deal of self-control. This means that an individual needs to take stock of what they have and what they need. In addition, remember the pay yourself first rule. Putting away at least 10 percent of any pre-tax income into a long-term investment is a smart choice.
Tip #2: Make Do with Less than You Earn
As a Reno CPA, I want to let you know that the road to individual financial management success starts with spending less than is earned. Although this may seem obvious, most Americans live in a debt-ridden situation. This situation is created by depending upon credit in order to survive. When an individual is drowning in plastic, it’s a hard swim to financial freedom.
Tip #3: Mark Bills Paid
As a qualified financial planner, I advise consumers that another proper individual financial management activity is to pay bills on time. This activity allows consumers and ability to avoid all those nasty late charges that can chip away at a savings potential. In addition, this helps to improve credit history.
Tip #4: Stick to a Budget
A budget is a blueprint for excellent individual financial management. Once established, it is vital to stick to it. When deciding on a budget, make sure that it is realistic. It is worth monitoring this budget either on a computer program or with a good old-fashioned pen and paper. It is also worth making a record of what you are spending, which will include everything from fuel to groceries. This will help you see where most of the money goes and how to optimize your spending.
Tip #5: Establish Realistic Goals
Goals are only helpful if they are attainable. Financial goals, such as purchasing a new car, buying a new home or taking a vacation, need to be reasonably set so they are always within reach. By pushing your goals too far ahead, it becomes easy to stop trying to reach your goals.
Tip #6: Create a Necessary Emergency Fund
Six months income is the proper amount to keep in an emergency fund. Deposit this amount into a high-yield savings account that is easily accessed. Forget about using it for everyday bumps in the road, keeping it available for real-life changing emergencies will be better in the end. This will take time but will be worth it in the end. It will also teach you how to get into a good saving habit.
It will always be up to the individual to manage their finances. However, following the advice of a CPA can set a person on the path toward financial growth and success. The important part in all this is to start right now, rather than putting it off for later.