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budgeting

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No wonder if you ask the question of “How to manage personal finances?” I am sure that majority of people will be left clueless about the answer. Spend less than you earn is easy said than practiced for most of the people but spending more than you earn is definitely an evil and it will bury you in debt in long term if you didn’t get control over your personal finances. Negligence over finances or not sticking to a budget is your type, you should rid of that habit and even for the rest it is important to adopt a budget strategy to take control over managing your finances.

I am not saying that you have to follow your budget plan strictly, personally even I would love to break the rules of the game but over long term it is important to follow a budget and make a financial plan that works for you. After all it is your personal finance and it should be personalized. If you are not confident enough on your financial strategy take help of a certified financial planner (better if he is a fee only planner, to avoid conflict of interest).

Log Your Expenses

Start logging your expenses no matter how small the amount is, it will help you in identifying the key areas where you are a spend thrift and if practiced for few months you will have a great idea and logging the expenses itself will give you a rough draft for your budget which you can further fine tune to make a solid budget plan that you can stick with for taking control over your expenses.

Tracking expenses is one of the major problem people face while managing their personal finances. Tracking your expenses will help you in identifying the loopholes you have in your personal finances and before you lost track and mess up things tracking would help you in fixing the potholes to great extent.

How to Log Expenses?

You can use any method that is convenient to you, be it an age old notebook where you can log your expenses, an excel program, or the modern age budgeting apps we have in mobile/web platforms. I will share the list of top mobile apps you can use for logging your finances and will update once I publish it.

Start Using Credit Card

The other way to skip logging your finances is to use your credit/debit card for all your purchases so you have a list of your expenses prepared automatically by your credit card company in the form of monthly statement and as a bonus you will be rewarded with bonus points which you can redeem for cash/gifts in future. Please note that this method is suggested only for those who have the habit of paying their credit card dues in time.
Tip: If you have more than one credit card then dedicate cards for specific purpose, for example dedicate one card for food, dining out & groceries and the other card for travel, fuel & maintenance.

Make a Budget

If you are one who wonder what is happening to your money at the end of the every month, it’s high time that you should watch over your spending habits and start tracking your expenses to draft a plan for budgeting. No matter which method you follow to log your expenses, evaluation of your finances at the end every month would help you to identify the categories where you are generous and if it is unnecessary you need to take steps to control your love. For example if you are the one who is fond of gadgets and have a habit of changing your mobile every few months, its high time that you should think once again about your love towards mobile phones as changing them every few months just for the sake of fancying newer technology will make a huge dent to your pocket and is not good for your personal finance. So make a budget that works for you and follow it religiously, breaking it once in a while shouldn’t matter if you have control over your expenses.

Plan for Recurring Expenses

If you have recurring expenses like paying tuition fees for your children, health/life insurance premiums that you should pay annually, etc, you should include them as part of your budget by considering each of these as very short term goals and plan a methodology you need to adapt to pay your dues. If done every month funding or allocating budget for these will be light on your pocket and you will be able to handle it with ease.
For example if you need to pay Rs. 75, 000 every year as tuition fee for your kid every year, it will be easy for you to allocate Rs. 6000 every month and invest the same in recurring deposit or the investment instrument that suits you for funding this rather than arranging Rs. 75000 in one shot.

Stop Living from Paycheck to Paycheck

Last but not least you should stop living from your Paycheck to Paycheck and start building emergency fund if you don’t have one in place. The importance of emergency fund is tremendous in a finance plan and it could you in many ways to cite few it can help you in handling an emergency situation where you need a huge amount beyond your salary, helps you in handling stress in case if you lost your job, etc. I will write a post on why you need to build emergency fund and with detailed use case in future.

Few other things that you need to concentrate for handling your personal finances:

  • Assume that you earn less than you actually do, for example if you are earning Rs. 50000 per month, think that you earn Rs. 40000 and allocate the same towards your goals/retirement in addition to your actual contributions.
  • Pay down Your Debt as soon as possible no matter how small it is, living debt free life is like living equivalent to living life like a king.
  • Plan for your retirement, don’t forget your future and start investing for your retirement today.
  • Consider downsizing and change your attitude towards money. If you are living in a place which is huge enough for you check out if it is really required and change to the place which is sufficient enough for you. Likewise revisit your cable, cellular, telephone, electricity bills and reduce the clutter wherever possible.

Between Us: In this post ‘How to Manage Personal Finances’ I have covered things which will work for majority of people but can few other areas which I have not touched here comment out to let me know about them and also let our readers and me know on how you manage your personal finances and what are the steps you follow to keep yourself motivated.

Happy Investing and hope you will take control of your finances today!

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Your utility bills are likely a regular source of frustration for you. With winter coming up soon, you might be dreading your energy bills even more. The good news, though, is that there are ways to save energy — and money — when you plan appropriately for the future.

In the case of energy savings, it is encouraging to know that what you do to save the planet can also help you make a little more room in your budget. Here are 5 ways that you can save energy in your home, and keep a little more green in your wallet:

1. Get a Home Energy Audit

You can actually perform a home energy audit yourself, or pay to have someone else do this. A home energy audit can help you identify areas where energy is escaping, rather than staying to keep your home more efficient. A home energy audit can locate leaky vents and ducts, as well as catch bigger issues like insufficient insulation, or leaks around doors and windows.

2. Patch Up Leaks

After your home energy audit is complete, you can patch up the leaks. You can fix leaky ducts with sealant, and you can add more insulation. You can also get stripping to reduce air leaks around doors and windows. Another place to shore up leaks is around plugs. Get help when needed. It is worth noting that, through the end of 2010, you can get tax credits on some green home improvements. So, spend some money now to plug the energy leaks, and reap a tax benefit — and regular monthly utility savings.

3. Switch Out Your Appliances

If you have old appliances, or appliances without an EnergyStar rating, it might be worth it to switch out to appliances that are more energy efficient. You can save money on your utility bills with more efficient appliances. You can take advantage of state incentives to upgrade as well. Contact your state to find out about a cash for appliances program, or other programs. If you upgrade to an efficient home cooling or heating system, you are eligible for that green home improvement tax credit available through the end of the year.

4. Do a Daily Energy Audit

This doesn’t mean that you do an all out energy audit each day; it merely means that you should look over your home at the end of each day, before you go to bed, to see if anything is amiss. Make sure windows and doors are shut tight. Turn off your electronics, and make sure that there aren’t energy vampires slowly adding to your inefficiency. Power strips can help you cut down on this problem. Plug similar items into the power strip, so that things like your computer, printer, TV, game console and other items aren’t still drawing small amounts of energy during the night.

5. Maintain Your Appliances and Systems

You want to maintain your appliances and systems so that they remain in good working order. Properly maintained heating and cooling systems work more efficiently, and are less likely to break down. Change filters regularly (save more money in the long run with reusable filters that you can clean every couple of months), and get the scheduled maintenance. When your appliances and systems are in good working order, you save energy — and money.

Bottom line: Saving energy is an effective way to also help you save money in your home. Get ready for winter this year by making your home more energy efficient.