This blog post may contain references to products or services from one or more of our advertisers or partners. We may receive compensation when you click on links to those products or services.
When we step back and take an overall look at our finances, there’s a good chance you can see a fair bit of room for improvement.
Many of us have a whole lot on our plate with regards to daily expenses and lack of free time to focus on finances, and so our bank accounts might not be looking their best, at least for right now.
It can be good to think of yourself as your own Chief Financial Officer, or like the CFO of a company to help you motivate yourself to get a little better at your personal financial management, and we have some great tips for you below.
Aside from having an excellent emergency fund in place, there are a few other financial practices to keep in mind to really take your finances to the next level.
Keep Accounts Separate
Off the top, one of the first things you’re going to want to do is segregate all of your finances to get a better look at the ‘big picture.’
What we mean by this is having multiple different bank accounts set up for different activities. With these accounts, you’re less likely to keep spending and spending until you land in the red.
It is always a good idea to have an account for bills, for everyday spending and for savings and move from here. Keep in mind that most banks will allow you to open multiple savings accounts for free and with the touch of a button in their app, so take advantage of this.
To make the best use of this, use your daily account or the account your income is paid into, to disperse cash for bills and savings. Whatever is left over is all for you to use, without the guilt or the confusion about what money is for what.
Improve Your Formal Education in Finance
When it comes to finance, there is nothing like a short course.
If you’re looking to better understand finance and your own finances in particular, then improving your financial literacy through online courses through providers like Upskilled is unmatched.
You will be able to better understand how the financial markets work as well as how best to build and sustain your own personal wealth.
One thing to keep in mind is that you’re also going to be able to better deal with uncertainty and the stresses or worries of things not going your way with regards to finance. This will make you a lot more resilient and give you the ability to intelligently take risks.
Consider Savings as Paying Yourself
One of the oldest financial pieces of advice you will hear is about paying yourself.
When it comes to this, we mean that you set aside one hundred or two hundred dollars into your savings account as a means of paying yourself. Getting into this habit of setting aside cash, though treating is as paying yourself is a great motivator to continue saving and to really get a hold of your finances.
Keep in mind that you may be making a small dent in your everyday cash, though over the course of a few weeks or months, the thousands of dollars in your savings account will make this well worth it.
Get Into the Habit of Rounding (Or Have an App Do it)
There is an upside to our bills and purchases never being in nice round numbers — and that is being you’re able to round just about everything.
Our biggest tip here, and a tip you should make use of each day is rounding up all of your expenses to the nearest dollar and moving that change into a savings account. If you want to go all-out here, you can also round whole dollars up to the nearest tenth dollar.
For example, your everyday account may be sitting at $77 – round this down to $70 and move the remaining $7 into your savings account.
There are also applications on the App Store and PlayStore that do this for you and make it effortless to save and invest your money. You will essentially be automating your savings here, and moving your financial skills up a level without having to do a thing.
Build a Wealth Cushion
A favourite tip of ours is to work on building a solid financial cushion.
Think of this cushion as similar to your emergency fund, though it’s more of an amount that is flexible to a point.
When you build this cushion you want to think of a specific dollar amount that will save you in an emergency and then make sure that your bank account always has this dollar amount in it.
Whether it is $1,000 or $5,000, you’ll want to keep this amount somewhere in your bank and never allow your bank account to fall below this number. This $1,000 or $5,000 amount is now your new, and financially intelligent, $0 amount.
For the times you do dip below this ‘$0’ amount, work on easing up on all non-essential spending and replenish it as soon as your next paycheque comes in — however, don’t get too comfortable with your cushion being below the threshold you set.
Wipe Out Debt
There isn’t really an upside to personal debt, at least at first glance, and so take it out at all costs.
As you will already know, debt is costly, demotivating and eats away at your wealth and savings every chance it gets. You should always be on watch when it comes to your personal debts like credit card debt, and work to get this number to $0 as soon as you can.
Keep in mind that every cent you lose to debt from a credit card is money that can no longer go towards your cushion nor can it work to build interest or be invested in the financial markets.
That in mind, structure your finances around paying off this debt and work to make a habit of setting aside just a little of your income explicitly for debt reduction each fortnight or month and you’ll be in a better financial standing in no time.
Make Finances a Game
To our final tip, it’s good to treat finances as a game.
Of course, money really is numbers after all, and you can have a lot of fun with them.
Think of a few different ways you could gamify your finances and work to follow the one that works out best for you. A common way to have some fun with your savings is to work to bump up your savings to the next hundred dollar amount each income cycle.
If you can build out your cushion or personal savings by a set dollar amount each week or month, and you’re excited and motivated to do it, then you’re on the right track to taking your financial skills to the next level.
With the above skills and tips outlined above, we’re sure you’re going to have no trouble at all when it comes to saving and understanding your personal income and wealth a little more.
It can be exciting to take your finances a little more seriously and with that motivation and excitement in mind, you’re going to be able to better set yourself up for a more prosperous future.
Become an Insider
Editorial Disclaimer: The editorial content on this page is not provided by any of the companies mentioned and has not been endorsed by any of these entities. Opinions expressed here are author's alone
The content of this website is for informational purposes only and does not represent investment advice, or an offer or solicitation to buy or sell any security, investment, or product. Investors are encouraged to do their own due diligence, and, if necessary, consult professional advising before making any investment decisions. Investing involves a high degree of risk, and financial losses may occur.