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Sunday, September 16, 2012
Spending within your means is also very important. Unless you are deep into retirement, do not spend your assets faster than you are making them. If you find yourself doing so, examine your spending carefully to minimize any unnecessary expenses; consider moving to a less expensive residence, downgrade your telecommunications plans, etc.
After you have a clear picture of where you are financially, you can proceed to make a budget. The best way is to use a spreadsheet program to do this. Put down the income that you are taking in every month. This will be your salary and anything other source. Then, write down an amount that you are going to save every month. Finally, write down the expenses that you need to pay every month. Identify each individual type, like rent or mortgage, car payment, insurance, food, clothing, etc. After you have your expenses listed, start allocating money to each of these lines. As you enter in a number, do a subtotal of your savings amount and expenses so you can keep an eye on the subtotal in comparison to your monthly income. Keep allocating. When you get to the end, look at the total of your savings and expenses versus your income. These two numbers should be the same. If the total of your savings and expenses is higher, you will need to go back to your list of expenses and decide where you will reduce the allocation. Do this exercise until your savings and expenses equal to your income. This will be your balanced budget.
Let your family and friends know of your financial commitments, and ask them to help you focus on your goal. They can support you in times when you feel like it is too much for you to handle.
Putting all of your eggs into a single basket is never a good idea. Protect yourself by diversifying your investments to minimize your financial exposure. Spread your savings around between several different accounts. If you invest in stocks, use a diversified mutual fund rather than just picking one or two stocks and sinking all of your savings into them.
To help track your finances, use a good personal finance program on your computer. There are many different programs available, and some can be had quite inexpensively or even for free. If you need help choosing a program, you can ask a financial advisor for a recommendation, or just read some reviews of different programs to see which one will work best for you.
The tips presented here will be very helpful in managing your personal finances. They essentially amount to "Keep track of your money" and "Find where you can save money." Just a little effort on your part can help you spend well within the limit of your salary. Spending within your financial limits can help you build wealth, which can make your later life much more comfortable.
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