Personal money management is multifaceted, addressing wide-ranging financial concerns. In fact, daily demands can make it feel like your financial resources are being pulled in every direction. And though these day to day cash considerations require attention, effective money managers also find ways to step back for a “big picture” viewpoint. When they do, most recognise three distinct interests, dominating their financial concerns.
Debt management, savings status and household budgeting represent key considerations for personal money managers. Understanding and embracing these three essential concerns sets the stage for ongoing success meeting expenses and establishing financial security for your future.
Outstanding balances owed for past purchases may be placing a strain on your current cash flow. As a result, effectively managing debt can have positive impacts on your spending power. If you feel as though interest obligations and debt commitments are holding you back, evaluate your debt load, with an eye toward cutting costs. Is your home mortgage due for refinance? Can you save money transferring a high-interest credit card balance to a lower-rate card? Is consolidation a realistic money-saver for your family? These and other concerns drive responsible financial management, helping you make the most of financing opportunities, without overpaying for interest and fees.
Consolidation Loans – Under some circumstances, it may be possible to borrow money at a lower rate than you currently pay for financing. Credit and store cards, for example, carry high APRs, so they are among the most expensive forms of borrowing. If these and other outstanding balances occasionally make it hard for you to cover costs, consolidating with a personal loan may simplify repayment, saving you money at the same time.
More Than Minimums – Making minimum required payments may keep creditors at bay from month to month, but paying minimums won’t erase your debt. If you are serious about paying-down balances, ditch the minimum guidelines and make substantial payments. If your revolving accounts typically carry full balances, nearly maxed-out at all times, a spending freeze may also be in order. That way, payments shave down your principle balance too, rather than simply enabling an expensive cycle of purchases and interest charges.
Be Realistic – Lending standards have tightened, following the global financial crisis. The wake-up call turned financial fortunes upside down for countless UK borrowers, so additional measures have been enacted to hedge against unwise lending. Still, it is up to you to borrow responsibly, within your means, for comfortable repayment. As a rule, borrow only what you need, under the best possible terms, and promptly repay balances.
Successful personal finance reaches beyond daily spending needs, establishing savings for the future. It isn’t always easy to reserve funds for a rainy day, but setting aside resources should be among your most important financial objectives. Cash reserves serve several important needs, stepping-in to fund:
- Cost of Education
- Homes and Other Major Purchases
- Income Disruptions and Employment Inconsistencies
- Medical Emergencies
Your comprehensive financial portfolio benefits from a household emergency fund, as well as long-term savings earmarked for retirement. For the best results, make money inaccessible for daily spending, holding savings in separate accounts and designated retirement investments. Setting savings goals and acknowledging benchmarks helps keep you committed, especially when your sacrifices pay off as comfort, stability and financial security.
Cash Flow Management
Irrespective of your level of income or affluence, managing cash flow is central to monetary success. The process balances income with outgoing spending obligations, creating sustainable financial conditions. If it helps, try treating your personal finances like a business, striving to maximise revenue, even as you control spending.
Positive cash flow creates profitability for businesses, and the same principle applies to your personal financial health. Without consistently running in the black, you’ll have difficulty saving money and accumulating wealth. Fortunately, by focusing on debt control, savings and balanced cash flow you can find short and long-term financial success.