Personal finance is an important part of life and most people have an idea on how it affects their lives. As Investopedia.com shares, it has a lot to do with how your money and even your future is handled and managed. Your finances is not just something that you deal with to get through in the present but it also has a hold in your future.
It is not only about making sure that your bills are paid on time, it also means making sure that your credit score is protected as well so you can enjoy more benefits in the future. Paying your credit cards in full every month does not only mean that you prevent paying more in interest and charges but it also helps you save more for your retirement fund to be used in the future.
Attending to your personal money management has a lot of similarities when you decide to take up physical fitness like weightlifting. You are not only able to look good at present with muscles popping out and a great posture, you are also investing for a healthier future. You get to work longer or have the energy to follow your passion which can bring in more income to your household budget for years to come.
There are tips to simplify your personal finances but one great way to make budget management a lot easier is knowing some life situations that has a direct effect on your finances. You might be surprised with how one of the most common scenarios, especially for new graduates is able to affect your finances.
Living alone is tricky
Living alone is a oftentimes a personal choice but with a few exceptions along the way. This is mostly evident with the young consumers especially those that recently graduated from college. They might not yet have a family of their own and are more focused on work and would need to be flexible on living arrangements. They usually choose to live alone but this has quite a number of effects on the way you manage your finances.
- Rent expense might be higher than usual. Deptofnumbers.com shares that that average rent in the country is at $905. If you are living alone, you really do not have any choice but to pay the rent in full by your own. You have to cough up a little less than a thousand dollars every month just for the rent. Taking out a mortgage loan might not be an option at an early stage in your life because you are still unsure of where your job will take you. But imagine if you take in a roommate or room in with a friend or co-worker, this goes down significantly and you can cut your rent costs into half.
- You pay in full for those utilities. One of the main categories in the budget plan should include the ones you put in utilities expense. Imagine if you have a cable expense at $40 every month. Regardless if you spend the day watching tv or just leave it on for ambient noise on weekends when you get the stay at home. You still pay the same amount. But if you have a roommate, you get to lower down that bill and other payment for utilities as well. At best, you get to slash this expense down to half.
- You have to buy the things you need around the house. Personal finance is not just about saving as much as you can because the time will come that you have to but things even around the house. More than looking at the quality over the price, you need to pay for every furnishing around the house if you are living alone. This is another downside to being alone in the house because you have to shoulder all the expenses even those new curtains and light bulbs around the house. You could have shared that expense if you have a roommate or flatmate who needs items around the house just as much as you need them.
- It is easier to control the bill. Since you are alone and you are the only one consuming, you get to basically control your bills which is one of the advantages of living alone. If you think that you need to cut down on some subscriptions, you only have to consult yourself. If you have to lower your electric bills, that can be easily arranged. You get full control in your personal finance management.
Who knew that a simple decision like living alone can have quite an impact on the way you handle your money? These are just some of the things that you get to encounter as you consider your way of life in relation to managing your finances.
Managing finances in the beginning
With everything in life, everyone has to start somewhere. The top athletes started playing their sport in their neighborhood and those really rich people started with nothing at one point in their lives. Those people that are able to manage their own finances also started with a clue on what to do. If you are in this life stage, here are some of the things you might want to look into to help you get started on the right track.
- List down income and expenses. You need to start with a solid foundation for managing your household budget. You can simply start by listing down all your sources of income which can be fairly easy if you are just starting out and itemizing all your expenses. The income side is quite easy if you have only one work to think about but the expense part is will take some time to get used to. It would help if you are able to jot down all expenses including those quick trips to the convenience stores to buy a pack of gum. At the end of the month, you get to see and analyze how you spend your money in a monthly basis and make necessary changes along the way.
- Live with your parents. WSJ.com shared the class of 2014 is the most indebted in history with an average of $33,000 student loan per borrower. This is the reason why some graduates choose to go back home and save up rent for a few years just to pay off their debt. This moves is made more logical if you cannot find a housemate to share expenses with and if your place of work is just near your parent’s house.
- Do not apply for more credit cards than you can handle. Be very careful with how you manage and use your credit cards especially if you are under the assumption that you can pay everything you swipe. Be sure to pay off the full amount every month. Otherwise, you run the risk of paying more than you should for purchases you buy with your card.
- Consolidate your debts. You need to know the proper steps when using debt consolidation but you need to understand how it makes your life a lot easier. Imagine those multiple student loans or even those credit card accounts that bear different payment amounts and various due dates. Consolidating your debt is a great financial move because it combines all your payments under one account. It helps you lower the risk of missing out one payment because you simply overlooked the payment.
Taking a closer look into your personal finance can mean more than just the checkbook. It can also be affected by your way of life or even if you are living alone or not. It can also be affected if you decide to go back to your old room in the family house even after you have graduated from college.