It is often said that human needs are endless. Upon the attainment of one thing, we start thinking of how to get another. A person’s needs and wants continue to increase daily. But whiles our needs are endless, our income is highly limited. We therefore have to learn how to balance the two.
Obtaining balance in your financial life is key to having a good life. Your needs, wants and spending decisions are interwoven with your finances as an individual, firm or social group. Due to this, you need to understand how to manage your finances. Here are some tips to help you understand your finances better.
1. Avoid Impulse buying; one major factor which cause imbalance in a person’s financial life is Impulse buying. This refers to the act of buying or purchasing things without having planned to buy it. Buying without pre-planning adversely affects your financial budget. In order to avoid impulse buying, always plan and prepare a list of items you need before hitting the market. This will reduce the chances of buying items that are not “necessarily needed”. For instance, a person who has interest in gaming would be tempted to buy a new game at the store whenever they go to a mall even if they haven’t prepared for it. Having a planned list of items will prevent one from buying things which were not included.
2. Always draw a scale of preference; when planning to procure items for use, it it advisable to draw a scale of preference. A scale of preference is a list of items that are written in order of importance or priority, with the most important items or needs coming at the top of the list and the less important ones at the bottom. This means that the more important needs will be attended to before the not so important ones come along. For instance, if paying for your electricity bills is at the top of your scale of preference, it is the first thing you would attend to when you have the resources.
3. Save for emergencies; one important thing to note is that, no matter how little your income is, you need to always put some aside for ‘a rainy day’. Having savings can come in handy when an unexpected expense comes up. This will reduce the probability of you going for loans; which normally have high interest rates. A good saving scheme can come in very handy on a rainy day. Always put away at least ten percent of your salary into a savings account.
4. If you’re running a business,firm or corporate group, do not mix your personal experiences with that of the business. This is important because putting the two together would negatively affect one at the expense of the other. The profits obtained from running the business should be separated from the money allocated for personal use. This will enable you to understand and know if you’re making profits from the business or not.
Employing these tips in your financial lives can help to significantly improve your finances and also reduce stress on the individual.