Managing personal finances is an important skill for every adult to learn. Many times, young adults tend to just look at a checking account balance to get a quick idea of what is left to spend. But that is not taking into account savings or the amount that is owed on credit cards or other loans.
It’s easy to slide by at first just living basically paycheck to paycheck but sooner or later it becomes necessary to take control of your finances and begin to save and plan for the future.Your First Step to Financial Responsibility
Your First Step to Financial Responsibility
At this point, selecting a personal finance software is a great way to learn to track your spending and start to manage your money and not just spend until it is gone each month. Creating a habit doesn’t happen overnight. Experts say that it takes between 45 and 60 days to really commit to a new habit. So deciding to sit down and enter all of your expenses on a weekly basis is a good way to start to ingrain that habit. After a few months of entering every penny, you spend each week, you will have a good amount of data to show you exactly where your money is going. You can clearly see how much is going to necessities and where you are choosing to spend your discretionary money.
The Next Step
With a few months of data collected, you will be able to decide what expenses you can reduce or eliminate to begin a responsible savings plan. After a few more months of tracking your spending on a weekly basis, you will be able to sit down and clearly see the reward to your hard work. You will have a balance on your savings and be able to see how it will grow in the coming months and years at your current rate of saving. You will also be able to decide if that growth is going to be enough or if you want to revisit your discretionary spending to trim more spending to boost your savings.
After about six months of tracking every dime that you earn and where it goes, you will have a pretty good idea of what you budget looks like at any given time. You know what you are earning, spending and saving. And to be honest, sitting down each week to enter a bunch of receipts is getting to be a boring chore. The information that you are getting is what you already know. So maybe you skip a week from time to time and only enter your info twice a month. But that means that it takes twice as long and it’s really hard to motivate yourself to do it. This might sound like a bad thing but it’s really a good thing; you don’t need software to help you in managing personal finances. You now know where your money is going and what you can afford. The habit is not only learned but you have learned from the information that your new habit provided.
Don’t Give it Up All Together
Now that you are feeling much more financially responsible and savvy, it feels like it’s the right time to throw away the training wheels and forget about using any personal finance software. But that is not the case. Now is the time to adapt your software to a more custom product. Maybe you want to begin to track your savings or to begin investing in a few stock to grow your savings. Or maybe you want to create an expedited payment plan to eliminate your debt more quickly. All of these processes can be done using the software but on a less regular basis. Maybe you enter your savings every month or two to see how the interest is helping it grow, or maybe you track the increase in your stock value. The key is to use the program to get the information that you want and to have as a reference if you need to make a drastic change in your budget.
The Biggest Take Away
The most important skill to learn when managing personal finance is responsibility. In the beginning, it helps a great deal to have the reinforcement of seeing the numbers on the charts and graphs. But as you get more used to thinking about where you want to spend your money and how much you want to save, the graphics become less important. You have created the habit of being personally responsible for your finances. You have seen firsthand the benefit of committing to a savings plan and watching your account balance grow. You understand the peace of mind that you have achieved knowing that you have an emergency fund. You are living the benefits of financial responsibility. And the biggest benefit is that you can decide how you want your new personal finance skills to work for you.
How to Use it in the Future
Now that you have experienced the benefits of correctly managing personal finances, you can choose how you want to use this new skill in the future and what you want it to help you achieve. If you have the dream of owning your own home, you know that all you need to do is set up a savings plan and it can happen. Saving a down payment and paying off any credit card debt will allow you to purchase the home of your dreams. What is most important is that you fine tune a plan that works for you and one that you are comfortable using regularly. It might turn out to be entering info once a month or once a week but do what works for you and lets you feel in control of your personal finances. Managing personal finances should not be difficult or feel like a chore. It is a tool that helps you to get the maximum benefit from your money and your hard work.