Personal financial management is essential for attaining your objectives and having a prosperous future. After all, it is the path to being capable of taking care of your own life, achieving financial independence, and escaping from indebtedness, which now represents 70% of indebted families in Brazil, according to the National Confederation of Trade in Goods, Services, and Tourism (CNC).
Taking care of your money, on the other hand, is a simple chore that must be done on a daily basis to preserve your financial health out of debt and default. However, certain recurring behaviours might be detrimental to your finances, jeopardising your ambitions. This is often the consequence of a lack of information and self-control.
Change your tale by reading about the practises that prohibit you from having strong personal financial management.
1. Buy on impulse or without research
Making a purchase without forethought is one of the things that may sink your financial life, but when it occurs at a modest cost and seldom, it isn’t what will seriously upset your budget. The issue arises when this becomes a habit, and the amount at the end of the month has an influence on your personal financial management.
A advice is to avoid leaving the home with a credit card and a large sum of money, since this reduces the likelihood of spending on impulse on anything unneeded. The second is to compare pricing at as many businesses as possible, since the same goods might be found at different costs — and, of course, always try to negotiate payment in cash.
2. Accounts in arrears
Some individuals have the tendency of paying bills beyond the due date, even if they have enough money to pay off the obligation. This might happen due to a lack of organisation, carelessness, or, believe it or not, just not caring about paying on time. This habit, however, is incredibly damaging to your budget since it includes interest.
In certain circumstances, the growth in the value of the overdue account may seem little, but don’t you think that it’s money wasted? If this happens regularly in your financial life, total up the interest paid on delinquent accounts for the year. The value might be better employed for personal or investment purposes, for example.
3. Get out of control with your credit card
The credit card is an adversary to people who lack personal financial management. After all, all you have to do is run out of money for the month and use credit to spend today, not knowing whether you’ll be able to pay the bill next month. The issue is compounded when the individual has very high restrictions, which are frequently larger than their monthly income.
The credit card must be used for scheduled purchases when the instalment amount is equal to the cash value. To ensure the discharge of the invoice, you must include the amount of the instalments in your budget. Keeping in mind that partial or late payment of this sort of account leads you to lose control of your own finances.
4. Lack of financial education
Knowledge is the key to having a positive relationship with your money. So it doesn’t matter whether you understand arithmetic, economics, or anything else. It is essential to invest in your financial education and research relevant issues. You will eventually comprehend how your spending works and will be able to manage your finances better.
Many individuals grew up with parents or guardians who did not understand how to have proper personal financial management, which effects their adult connection with their wages and spending. As a result, strive to identify these bottlenecks and learn from the errors of others, such as modifying your behaviours to be an example to your children.
5. Lack of investments
Lack of investment is also associated with a lack of financial knowledge, as it is usual for individuals to perceive themselves as merely paying boletos and that investing is exclusively for those with a lot of money. However, trust me when I say that investing is the best method to enhance your earnings and, who knows, have a lot of money in the future. It all depends on how much money you want to put up and how much danger you are ready to face.
There are different methods to invest; some choose to save and take very little risk, while others prefer to invest in fixed or variable income, for example.
The reality is that there is investment for all profiles and, more importantly, ambitions — which adds considerably to your personal financial management. As a result, think of the investment as a monthly payment to yourself for your future.
6. Not tracking expenses
Have you ever utilised a cost management app? Did anything change after you used it? Understand that this sort of material may also be used in a spreadsheet or as simple notes in notebooks. However, in order to get a result, you must watch the evacuation of your money. Personal financial management is almost difficult if you don’t.
The goal of expenditure monitoring is to identify and address bottlenecks in your budget. So use one of these note-taking ways to keep track of and incorporate upcoming costs, such as auto insurance renewals, school supply purchases, and more.
7. Don’t aim for money
Your lack of attention leads to your money not earning, so it enters your account and you spend it with no idea where it goes, leaving you with nothing at the end of the month. To have effective personal financial management, your money must have a purpose, thus divide values by service category, for example.
The objective is to set aside money for needed expenses, food and transportation, recreation, knowledge (financial education, professional courses), and investments. This strategy teaches your brain that you have a spending limit in each aspect of your life and that you must save so that you do not exceed it. This makes it simpler to reach new objectives, such as saving for a vacation or improving your home.
To get greater personal financial management, keep track of your earnings and spending, and keep an eye on your anticipated costs. As a result, your money becomes a door to wonderful chances rather than a source of concern in your life. By following these suggestions, you will have greater flexibility to make decisions while being calm.