Tuesday, February 23, 2010

Managing Finances Effectively

Managing Finances Effectively
Money is an important need of every individual. People say money makes the world go around and it’s the reality. Right now, the world is faced with financial crisis and almost everybody is striving to balance their expenses with their income. However, with continues increase of goods and services price, the people are left with only two options: whether to cut off their expenses or increase their income by looking for other means of earning more.
Somehow, one reason why people experience financial problems is because they lack effective strategies on how to manage their finances effectively. Hence, this article outlines some practical helpful tips on how to manage finances effectively.
  1. Determine needs and wants. Grab a sheet of paper and list down all the things to be purchased. Then carefully examine the list to determine those “needed” and “wanted” things. Needs are those that a person can’t live without like food and shelter, while wants are those that a person can live without like extra or luxurious bags, accessories etc. After which, separate those needed from wanted list.
  2. List down the priorities.  Having listed the “needed” things, it is also important to arrange the “needed” list in the order of priorities. The most urgent needs are ranked as the top priority down to the least priority.
  3. Budget expenditures. Put assumed market prices of the needs and see if the available money can cover them all. If not, buy first the things under top priorities. Keep track on all of the expenses being incurred weekly or monthly. This way, it will be easy to determine what area spends more money and examine if there is a possibility to reduce the expenses.
  4. Avoid impulse buying. Impulse buying is also called an uncontrolled spending. This usually happens when people go to the malls or markets. This is why discipline is needed in handling money. It would be better not to bring more money in the grocery stores or malls than what is actually needed. Through this, impulse buying can be avoided since there is no extra money to spend.
  5. Avoid having debts. Debts make life even harder. It is so easy to apply and get approved for loans or credits but it is very difficult to pay. It is then important to avoid having debts as far as possible.
  6. Always set aside something for savings. It is very important to save something to be used during emergencies. There has to be an amount saved weekly or monthly no matter how tight the finances are.
As a conclusion, financial struggles or problems can be minimized through effective management of finances that should be adopted by each household or individual.

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