No matter how big your salary or income, if it can't be managed properly, it can make your finances minus every month.
So, the key lies in how to manage personal finances. Before financial problems arise and develop, let's start managing your finances in the following ways.
How to Manage Personal Finance
Many people already know this theory but are lazy to do it because it is considered complicated. In fact, by keeping financial records, you can clearly know where the money is going.
Is it used for basic needs or more for lifestyle needs. So that in the future, you can make better financial planning, according to your priorities and needs.
Create a Monthly Budget
In making a personal finance budget, there is no ideal amount to follow. Everything can be adjusted according to the priorities and needs of each.
But you can follow the 40-30-20-10 division reference. Allocate 40 percent of income for daily expenses, such as the cost of monthly bills for daily shopping needs. Then 30 percent to pay off debt installments if you already have it.
20 percent for investment savings for a better financial future. As well as the remaining 10 percent for social activities and kindness.
Manage Expenses Wisely
Everyone has their own needs and strategies for managing finances. Prioritize income for things that are mandatory and important. Don't forget about free time for lifestyle needs, but don't overdo it.
If you have a financial goal, make it your priority to reach it immediately.
Have an Emergency Fund from Investment
Another way to manage personal finances is to have an emergency fund. The need for emergency funds is important to anticipate an emergency or urgent situation so as not to affect your financial condition.
The amount of this emergency fund can also be adjusted to your risk and financial profile. Before choosing an investment product, study in detail the advantages and disadvantages.
Have Health and Life Insurance
There are still many people who do not understand the benefits and importance of having insurance. They feel a loss because so far they have paid for insurance but have never felt the benefits.
But the risk if you do not have insurance and require hospital treatment is a big expense and you have to bear. Therefore, it is important to have insurance, especially health and life insurance.
Pay Off Debts or Installments
If you have debts or installments, prioritize first to be able to pay them off one by one. Try to only have productive forests and avoid consumptive debt. The recommended monthly installment is no more than 30% of your income.
Avoid Consumptive Debt
Financial planning experts advise you to avoid consumer debt. On the other hand, productive debt is an option to increase your income, for example you borrow some money for business capital from a bank or make a vehicle loan where the vehicle is used to work or make money.