Six effective tips to stay on top of your personal finances

Organizing your personal finances is the most effective way to achieve financial peace of mind. That’s why we’ve collated 6 tips to help you take back control of your personal finances. Uncertainty over ways to organize your personal finances is common and can give rise to problems in your personal and professional lives.

After all, those who do not have control over their personal finances may end up spending more money than they earn. This can lead to an accumulation of debt and interest charges, which in turn can create a debt trap that is often hard to overcome.

That’s why it is essential to learn how to organize your personal finances. But if you still don’t control your money correctly, don’t despair!

The most important thing is to take the first step in the right direction, because with a little dedication and the right knowledge, it is possible to change this situation once and for all.

6 effective tips for organizing personal finances

At the outset, it is worth noting that dedication, planning and the use of appropriate tools are needed to help with personal financial control to maintain regular finances.

1. Identify and differentiate spending;
2. Track your earnings and spending;
3. Learn about investing;
4. Set your priorities;
5. Spend less than you earn;
6. Control impulse purchases.

1. Identify and differentiate spending

The first step is to identify and differentiate all your expenses.

Planning your expenses well and saving money is essential to organize yourself financially. Therefore, it is very important that you identify and differentiate your expenses.

There are several ways to go about this. But regardless of whichever option you chose, it is recommended that you separate essential expenses from personal desires.

In the 50-30-20 rule, for example, the ideal is that expenses are separated as follows:

• 50% for supermarket;
• 30% for personal wishes;
• 20% for savings and/or paying down debts.

Following a simple rule can also help you emotionally and could encourage you to follow other personal finance tips.

2. Track your earnings and spending

It’s crucial to keep track of money coming in and out of your bank account, in addition to identifying your earnings and expenses. That’s why some people turn to budgeting tools and other financial control applications.

With that in mind, make sure to record everything: wages, pension, any additional income, rent, groceries, utilities and transport costs. Try to be as comprehensive as possible, capturing even small expenses. Leaving them out will cause you to underestimate your spending, which can make a big difference at the end of the month.

3. Learn about investing

To build wealth over time, it’s also important to put your money to work. After all, there is no point in accumulating money, if all you do is leave it in a low-interest-bearing bank account, where it will lose its purchasing power to inflation.

That’s why it’s important to think about allocating your money to investments that can generate a steady stream of income over time, and/or carry the promise of capital appreciation. You should also start by mapping out your financial goals and building an understanding of your risk appetite.

If you have a higher risk tolerance, you could look into investing in volatile asset classes such as stocks, commodities or even cryptocurrencies. Visit the Trusted Brokers website to compare brokers and investment opportunities.

If you decide to invest in the shares of individual companies, you’ll need to do your homework: understand each company’s market, their financial performance as well as the strength of their management team. If this isn’t for you, you could instead invest in ETFs that track industries or passively replicate stock market indices like the S&P 500.

Alternatively, if you’re more conservative, you may find fixed income investments, such as government bonds (U.S. Treasury Notes or Bonds, or UK Gilts, to name a few) more appealing.

4. Set your priorities

Now that you know how to identify and track your expenses in order to know how to organize your finances, it’s time to understand how to set your priorities.

It is extremely important that you analyze your prepared budget, whether for the month or the week, in order to separate essential from non-essential spending.

In addition, scheduling expenses makes the process of paying bills simpler, without taking great risks of getting into debt.

5. Spend less than you earn

To spend less than you earn, you must first create the habit of frequently monitoring your bank statements, identifying exactly how much comes in and how much comes out of your account.

It’s also important to be wary of spending on credit cards, as they can create the illusion of additional purchasing power, especially when they come with installment payments, sometimes without interest.

Always be mindful that a credit card is not extra income. At some point, you will have to settle the bill. This is money that will have to come out of your income and hence future spending.

If your personal finances aren’t in order, you may find yourself unable to pay your bills. This could prompt you to take on more debt, and may eventually lead to personal bankruptcy.

6. Control impulse purchases

Last but not least, create a priority list of what you need. This will help you control impulse purchases.

When going to the supermarket, for example, using a printed shopping list to avoid falling prey to temptations and buying products on impulse. Or, if you find it more practical, turn to a shopping list app to avoid dishing out on unnecessary items.

Finally, it’s also a good idea to follow what’s sometimes called the “24 hour rule”. If you’re tempted to buy an item that isn’t on your list, simply wait until the next day. More often than not, your urge to buy will have passed.

Closing thoughts

Generally, people make plans with the aim of improving their financial situation. Therefore, it is common for them to look for alternatives that help in this mission.

This quest can be looking for knowledge on social networks, blogs, financial education books, personal finance courses or other ways to acquire knowledge.

After all, regardless of your current financial situation, it is important to learn how to organize yourself financially.