Personal financial management


Many people have large incomes but feel they still have financial problems. When we receive a salary or have more money, our desire to buy something is higher and ends up being consumptive. And finally, sometimes it's difficult to save or invest for the well-being that we will experience later. They are trapped in a hedonic treadmill.

For example , their income is $ 5000 in one month, but the amount of debt and bills is more than 70% of income, you can guess right. Well, financial problems sometimes make us stressed to the point of frustration if we can't manage finances and manage income and reductions properly.

Therefore, it is important for us to learn to manage finances so that we can enjoy the results later. To do this, let's start with the simple steps before moving on to the more difficult ones. Here's how to manage finances well:

1. Make Personal Financial Records

If you don't make personal financial records, then you can't manage your personal finances properly. The uses of personal notes are many. This method is a basic way that we can do to start managing personal finances well. If we do this consistently, our personal finances will be well organized and not messy.

The function of personal financial records is to track where we spend the income we get. Besides that, we can find out what expenses we can reduce (if it's not really necessary) which only makes the nominal expenses increase.

Personal financial records can also be for financial goals that we want to achieve with a predetermined timeframe. For example, want to buy a house, car, or buy other things.

2. Create a Monthly Budget

To create a monthly budget, there is a formula that we can use, namely 40 - 30 - 20 - 10, meaning that 40 percent of income is for daily expenses, such as monthly billing costs to monthly expenses for daily needs. .

Then 30 percent of income to pay off debt installments if you have debt. Furthermore, 20 percent of income to save or invest for a good financial future. And we will allocate another 10 percent for donations such as zakat or tithing.

3. Create an Emergency Fund from Investment Savings An

emergency fund is a very important fund to anticipate an emergency or urgent situation so that it does not affect our financial condition.

In life, of course, there will be many unexpected events or disasters that may occur, so we must have an emergency fund. We can get emergency funds from the funds we collect in investment savings.


4. Have Health & Life Insurance

Some people still think about the benefits of having health and life insurance. They feel a loss every time they pay for insurance but feel they do not get the benefits. As said in the previous point that we cannot predict what may happen or the disaster that we may face in the future.

And that is the function of having health and life insurance. By having insurance, we can get many benefits, including to pay for treatment or care, protect assets and prevent loss of assets and debts, can replace installment payments and debts and increase funds for family needs.

5. Avoid Consumptive Debt Consumptive

debt is a loan to buy goods whose value will continue to decline in the future and do not generate profits. For example, say you go into debt to buy clothes, bags, or hats for a lifestyle that looks luxurious, but doesn't generate income for you. If you continue to do consumer debt, then it will only make your finances thinner.

6. Pay Debt Immediately or Installment

Prioritize to pay and pay off debts and installments if you have them. Because if you ignore this, then it will ensnare you in the future. And finally it will bother you in managing personal finances.

Be grateful for what you have and stop being prestige


 

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