There are several things I’ve struggled with in my adult life. However, if I can single out one thing that I struggled with the most it would be handling my personal finances.
I got married and started a family quite young – at 22 years old to be exact – and I have to admit that my then-husband and I were not at all financially secure yet at that point. This eventually led to bad money habits, debt, and ultimately became one of the biggest causes of the demise of our marriage.
Needless to say, I’ve learned lots of lessons along the way in terms of financial control and handling personal finances. I think this is an important topic to discuss in one’s family and so, I’d like to offer some tips to those of you who may need it.
Learn about personal finance.
In college, I learned about financial management for business. However, we were never taught anything about managing personal finances. My parents also never really taught me anything valuable about it that I could apply to my life.
Personal finance is not really something that schools prioritized teaching. In fact, according to a US Survey in 2020, personal finance courses are not required for all high schools with only 17% of students being required to take them.
So, if you also don’t know much about it, take courses, read some books, talk to an expert. You can’t really manage anything unless you understand what you’re doing.
Develop a financial plan.
I always say that “failing to plan is planning to fail”, and this holds true for finances as well.
Talk to your spouse and discuss what your goals are for your family. Make sure they are realistic. List them down according to priority. Create a timeline. There may be goals for the short term and some long-term ones as well. Then, create an action plan on how to achieve those goals.
Create a realistic budget and stick with it.
One strategy to make sure you’re following your plan is to have a budget. Start by listing down all your typical expenses and income in an Excel file or Google Sheet. Total them all. See if you are spending more or less than what you’re bringing in. Then, make the necessary adjustments.
The key here is to not only keep your budget realistic but also be disciplined enough to stick with it.
Prioritize paying off your debts.
Did you know that in 2020, the average American has $90,460 in debt with Gen Xers (ages 40-55) with the most debt at $140,643? This includes all consumer debt such as student loans, credit cards, mortgages, etc.
The thing is, we all know that debt accumulates interest, which means that the longer you take to pay it off, the harder it will be to pay off. So, isn’t the smarter thing to do to prioritize paying them off first? I think so.
Cut down on unnecessary spending.
When you listed down all of your expenses, did you notice how much of it was actually necessary? You might realize that a lot of them are really something you can live without.
If you’re really serious about taking control of your finances, you need to trim down the fat, so to speak. Be frugal and be honest with yourself if something is really a “need” or just a “want” before you spend on it. And while you’re at it, cut down on using your credit card and just save using it for actual emergencies.
Build an emergency fund.
If there’s anything the current Covid-19 pandemic has taught us it’s that things are unpredictable. That is why it’s important to prepare for emergencies. We never know if any of our family members will get sick or if they will suddenly lose their jobs and their income.
Having an emergency fund will at least allow us to handle the situation with less stress knowing that we have something set aside while we’re in the process of rebuilding.
Taking control of one’s finances is definitely a must for all families. It will not only take care of our family’s needs now but also help secure our future. Try these tips to help you get started if you haven’t already.