4 Mistakes and Solutions in Managing your Finances

How to Manage your Finances?

Managing finances is not easy for everyone, especially for those who are just starting to learn the basics of finance. There’s tax preparation, bookkeeping, auditing, budgeting, etc. This might overwhelm some people and sometimes, leads to serious financial troubles. Fixing your financial problems means identifying the source of the problem, and by that, you can solve your financial issues. Here are 4 mistakes and their solutions to manage your finances the right way.

Problem and Solutions to Manage your Finances

Follow these four steps consistently, and your financial mistakes will start diminish-along with the financial stress and you will get the solution to manage your finances effectively.

Problem # 1: You are constantly running out of money, and you’re having a hard time identifying what causes it.

Solution: Create a budget

The easiest way to create a budget is to identify what you had spent in each category each month and that makes your basic budget. Your goal here is for your money to have a place to go so that you do not have any left over when you are done. This means that the money you put into your savings is planned as one of the expenses on your budget. You may do your budgeting on excel, or you can use budget tracking software such as YNAB or Mint.

Problem # 2: You tend to spend too much

Solution: Address the leaks in your budget

Even if you have a budget, you might have a tendency to overspend, like during those days when there is a big sale and you went shopping like crazy. To avoid this, try to limit your spending or find someone who will remind you that you have already exceeded your budget when shopping. It is better also if you don’t use your credit card. This is also the same when you spend too much when eating out- try to find budget-friendly restaurants.

The key is this- spend your money wisely.

Problem # 3: Credit issues

Solution: Avoid making late payments

Credit problems may be one of worst things that could happen to you. You’ll have difficulties in renting an apartment or buy a home, and worse, difficulties in landing a job. The solution here is to understand how your credit card works and avoid making late payments. Late payments can bring down your credit card score. To avoid this, you need to work on becoming current on all of your payments. This is not the same as addressing debts that have been sent to collections. Paying on time every month will definitely raise your credit score.

Problem # 4: Using Too Much of Your Available Credit

This problem also leads to a low credit score. Using too much of your available credit is being near the limit on your revolving lines of credit.  

Solution: Pay down your debts

To make this effective, you need to focus on one credit at a time so that your payments will go much more quickly. When you are getting out of debt, you may want to close each credit card as you pay it off, but actually, this would lower your score. Instead, you need to leave them open until you have paid off your debt, then you can start closing accounts.

Managing finances is not that as complicated as you think. Make a budget, spend wisely and comply with your credit requirements is all that it takes.