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5 Tips to Manage Your Personal Finance Today

17 Feb 2022

5 Tips to Manage Your Personal Finance | VI

Are you struggling to keep up with your bills? Or are you wondering how to improve your financial situation? If you feel overwhelmed about your personal finance, you're not alone.

With high prices, increasing commitments, and endless options for entertainment, it's easy to get trapped into bad money habits or don't know how to start a good one.

Who can blame us though? A lot of us were never taught how to "adult" properly, especially when it comes to money. School didn't teach us, most of our parents didn't know any better, and all we can do is attempt to figure them out as we go along.

A lot of people may seem like they are guaranteed a long healthy life and they don't have to start growing their money today. Or "YOLO" as they say. But that's not the case, is it?

As humans, illness, accidents, and death are ever-present. No one thinks it'll happen to them until it does. And if you're not prepared today and something happens tomorrow, you're no longer able to work and bring in income, what happens then?

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That's why it is more important than ever to start managing your personal finance today and be prepared for anything that may come along.

Here are five simple tips for sure you can start right now.

1. Set a target

A certain Marvel movie once said, "If you aim at nothing, you shoot nothing." So before thinking of ways to grow your money, why not set a financial target first?

Where do you want to be financially when you are 55? How much money do you need to retire after taking things like inflation into account? This target should be amount- and time-specific.

Once you have it, work backwards to project how much you need to be earning each month.

If you're not earning as much for your salary, it would be a good time to start thinking about what you should do to improve your personal finance.

2. Budget

Set a budget | Personal Finance | VI

Do you know how much you're spending on food, transport, telephone bills, and everything else each month? If your answer is "no", it might be time to start recording all these.

Not having a budget while wanting to reach your financial target is like wanting to go to a place you've never been to without a map.

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By having one, you at least have a clear picture of where your money is going and how much you need to earn or save each month.

3. Invest and compound

What if we tell you that starting to invest and compound now versus starting say 10 years later can make a world of difference?

Einstein once said this, “Compound interest is the eighth wonder of the world. He who understands it, earns it … he who doesn’t … pays it.”

There's a whole math equation involved here which we're not going to bore you with. But something is for sure: By compounding a small amount over a long period, you actually get more compared to compounding a bigger amount but within a shorter period. 

Invest in something with a good return, you will see your money increase many times fold over the years. If you do it right and early enough, you might even reach your financial goal before the time you've set.

4. Find a source of passive income

Investing to compound your money is great (and necessary), but it'll be even better if you don't have to work so hard to earn the money you need to compound.

Apart from investing and compounding your money, you should also have a source of passive income.

Our monthly salaries or business earnings are called active income or money you need to work for. Once you stop working, the income also stops coming.

Passive income, however, does not require much of your effort. Even if you are not actively working to earn them, the money will continue to flow in. A good example of that would be dividends from stocks.

By having a passive income component in your personal finance, you will have less stress to earn more, and more chances to enjoy life as you will be making money even when you're sleeping.

Interested to join our FREE class on creating passive income? Register here.

5. Find friends with healthy personal finance

Your network is your net worth | Personal Finance | VI

A very underrated and less-talked-about criterion when it comes to wealth-building is friendship. No, not just networking, but friendship in general.

By now, you would've heard a lot of people saying "your network is your net worth." Hence, you see a lot of people going out and networking with their fellow professionals Monday to Friday.

On their days off, however, some are still hanging out with their friends who would belittle their dreams, or getting involved with friends who have terrible spending habits.

This two-step-forward-one-step-back "tango" will not only slow down your wealth-building process, but you might also find yourself gradually talked out of building your wealth.

Think about it. If amid all your budgeting and investing, you're constantly with your childhood friend with a "YOLO" mindset, zero savings, and constantly attempting to dissuade you from saving money, wouldn't you be mentally affected one way or another? 

In a world where people are doing their best to lead an "Instagrammable" life, plenty of new things to experience, and the pressure to look good among your peers, good personal finance is underrated.

"There’s always tomorrow," they say, but that's not always the case.

Of course, this is not saying that you should only focus on saving and forgo the pleasures in life. Self-care and memorable experiences are also important, and you should never skip those. However, there also need to be a good balance between pleasure and reality.

Taking small steps to start is better than taking no steps and before you know it, you'll realise you've come quite far.

DISCLAIMER

This article and its contents are provided for information purposes only and do not constitute a recommendation to purchase or sell securities of any of the companies or investments herein described. It is not intended to amount to financial advice on which you should rely.

No representations, warranties, or guarantees, whether expressed or implied, made to the contents in the article is accurate, complete, or up-to-date. Past performance is not indicative nor a guarantee of future returns.

We, 8VI Global Pte Ltd, disclaim any responsibility for any liability, loss, or risk or otherwise, which is incurred as a consequence, directly or indirectly, from the use and application of any of the contents of the article.