The ongoing health crisis could have forced you to take on a DIY personal finance approach to help you make ends meet. It was and still is a challenging time for a lot of people who are trying to manage their finances. Some are adjusting to working from their homes while others are beginning to go back to the office.
There are some people who are still trying to either get their old job back or doing their best to land a new one. CBPP shared that the unemployment rate for April 2021 was at 6.1%. Regardless of where you are at the moment, there is a good chance that you had to figure out a lot of financial learnings all by yourself in the past few months. It was a new and uncharted territory for many Americans brought by the pandemic.
A DIY personal finance approach could have been born out of need since you were at home trying to figure everything out on your own. If you were able to come out of the situation on top of your money situation, it can be a sign that you can manage your finances all on your own. But remember that this is not for everyone.
There are signs you have to look for to help you understand if this approach is a good fit for you. Just as it works for some people, it can do the complete opposite for those who aren’t equipped to manage their finances all on their own. This is why it is important to know your limitations and capabilities when it comes to financial management.
A DIY personal finance approach could work for the following reasons:
You enjoy in learning about personal finance
Not a lot of people can honestly say that they enjoy learning about financial management. For some, they might even think that it is boring and not something they want to spend time on. As long as they are earning and paying their bills, they are fine. Learning in-depth when it comes to personal finance is not for everyone. So if you enjoy it, then you stand a good chance of coming out on top with a DIY approach on money management.
But this is not to say that if personal finance is not your cup of tea, you can go ahead and forget all about it. You need to at least know the basics in managing your own money. This can help you stay on track towards your long term goals. But if you have that desire to know more and learn more than the basics then you could gain the knowledge to manage all aspects of your finances all on your own.
You have the time or it
Time management is a tough task to master and even the ones who have been trying it for so many years cannot seem to make it work. This is why if you want a DIY personal finance approach, you need to make sure that you have time for it. You can allot the time you need to go over your finances and not try to be a weekend warrior and hope everything works out.
You need to set aside a regular schedule so you can go over your finances regularly. It is not something you do once and then forget all about it. Yes, you can automate most of your financial activities to free up your time. But you still need to regularly go over them to make sure that everything is running smoothly.
You have the confidence to make big money decisions
Not everyone is comfortable with making big money decisions. This is different with everyday expenses such as monthly bills and expenses but they are a good start. If you are not used to handling your finances, there is a good chance that you are not too comfortable when dealing and making decisions concerning huge amounts of money.
If you want to take on a DIY personal finance approach, you need to be able to make big money decisions. But remember that confidence comes from knowledge. When you know what you are doing, you are confident you can manage the outcome. You can easily pivot around to get back on track.
You can manage your risk level
Risk is inevitable and your comfort level varies from one person to the next. If you are confident in managing big risks, it may be a sign that you can manage all aspects of your finances. This is true especially when it comes to your investments. In fact, it is one of the factors you need to manage then you start looking at investments.
The idea is that when you are just starting out to invest at a young age, you can take on higher risk because you can recoup any losses in your investment with the time you have. As you get older, you need to slow down and choose less risky options. This helps you preserve the returns you have over the years because any loss would be hard to get back considering you will not be working for much longer.
You might want to rethink a DIY personal finance approach for the following reasons:
Planning your financial future
Once you start to seriously plan for your financial future, you might begin to feel overwhelmed with all the goals you begin to lay down. You want to pay off your student loans, get a house, buy a car, plan for retirement, invest money, set aside some funds for emergencies, and so on. As you look at all these, you could begin to simply choose to ignore some of them.
Getting a financial advisor seems logical when you feel you are way in over your head in terms of goal setting. But remember that you also have to pay for their services. So shop around and check their rates. One way to approach this is to consider it as an investment all on its own. With their guidance, you will be off to a great start and be able to manage and juggle your finances the right way.
You don’t want to directly manage your money
It might sound like an unlikely occurrence but it does happen that people choose not to manage their money directly. If this is the case for you, then you need to get a financial advisor to help you grow your money over time. This could be a little stretch from a diy personal finance approach but remember that your investments are a big part of your finances.
You are too emotional when it comes to money decisions
Not everyone can make sensible money decisions especially when emotions are involved. Retail Wire even shares that some Americans spent over $180 in impulsive purchase in the middle of 2020. You could be an emotional spender where you mindlessly buy things you really do not need when you are overwhelmed with emotions. It is also possible that you are paralyzed by fear whenever you need to make big money decisions.
If this describes you, there is a good chance that you need a financial advisor to give you guidance and much-needed direction. You might be keeping all your money in a regular savings account because of fear. Or the opposite, you might not have enough at the end of the month because of impulsive purchases.
It is great to take on a DIY personal finance approach but only when you are capable and comfortable in doing so. If not, it does not mean that it is not for you. You just have to learn more about personal finance to help you make bigger and more meaningful money decisions.