Ways to manage your personal finances

There are many ways for a person to manage their finances, but there are some basic steps, such as having at least two bank accounts and using each bank account to manage money differently.

Here are some important steps to help you manage your personal finances.

Step 1: Open a bank account

If you don’t already have at least a chequing and a savings account, it’s a good idea to ensure you have both.

Your chequing account can be used for your day-to-day transactions, such as

• Bill payments
• Groceries
• Shopping
• Entertainment
• Savings Goals

You should also have a savings account to put money in so it can accrue interest and grow. Once it accrues, you can look at investing it, so the money grows even more, but the key is that the money shouldn’t be spent except for emergencies.

Some people go further and have separate bank accounts for each of their expenses, so they can more closely track where their money is going. For example, they might have a bank account to save up for vacations, one for groceries and another for car maintenance.

It’s up to you how many bank accounts you need and which types, but having at least two will enable you to manage your money and spend more efficiently.

Step 2: Create a budget

There are many different budgets out there. The most important thing to do is find one that you can stick with, enabling you to pay down your debt, cover your living expenses, and save money.

When you set up a budget, create a list of your fixed costs, such as your bills, groceries, rent, mortgage, loan payments, and other expenses that don’t change much from month to

month. Set aside a certain amount to cover your living expenses (often, it’s recommended that this be about 50-60% of your income.

Next, set a goal for savings, which will go to your emergency fund, major purchases, and vacations. This should be about 5-10% of your income.

Step 3: Transfer money that you don’t want to spend out of your chequing account

This is why it’s good to have more than one bank account. With money sitting in your chequing account, you may be more tempted to spend it. Moving it into a different account makes you more likely to leave it alone. Once you build up enough savings, you can move the money into something with higher returns.

Step 4: Put aside money for fun things

It’s important to make sure you can cover the necessities but if possible, make sure there’s room in your budget for the things that improve your quality of life. Put a limit on how much you’ll spend on these fun things–entertainment, experiences, and so on. Otherwise, spending all your money and winding up with nothing in savings can be easy.

Step 5: Build up an emergency fund

An essential part of managing your money is having an emergency fund. This fund will help you cover unexpected expenses, pay the bills if you lose your job, and help you get through emergencies. It’s up to you how much you’ll need in your emergency account to feel comfortable, but most people aim to have between 3 and 6 months of living expenses in the account.

If you don’t yet have an emergency fund, start small. Set a goal to have one month of living expenses and then grow from there. If you wind up using money in the account to cover an emergency, build it back up again as soon as possible.

Managing your finances doesn’t have to be complicated. With a few basic steps, you can more easily manage your money.