Good Personal Finance Management is a practice that pays off in the long run. A financially savvy individual often stays on top of their bills and ends up with extra bucks to put into other important things like paying off debts, putting a deposit on a planned purchase, taking a holiday or even saving towards one’s pension. It’s becoming increasingly vital for people to refine their money management skills by learning and upholding habits such as: how to prepare a budget, paying off unsecured personal loan and credit card debts and how to set savings goals.
Preparing and managing budget
This is always the first step in taking control of your personal finances and is also arguably the most important. Preparing a budget may take some time and effort on your part, but the benefits far outweigh the costs. Firstly, having a budget helps one maintain peace of mind on their daily expenditures, and goes a long way to making them feel better about themselves in general. Preparing a budget guarantees that you spend within your means, you are less likely to end up in debt and helps you build high credit rating with lenders.
However, even with the most well-fixed budgets, several factors (like unrealistic expectations) can creep in and make you lose focus on your target. When this happens, it’s important to retrace your steps and employ cost cutting measures to regain control. Such measures include all efforts towards ensuring that you do not spend more than you have coming in, and includes:
• Cutting extra and unnecessary expenses
• Employing measures to try and increase your income
• Lowering your fixed expenses e.g. utility costs
Preparing a budget and adhering to it is only good as long as it keeps you from debt. The goal to manage personal finance effectively means managing debt as well, and one of the best ways to manage debt is debt consolidation by way of personal loans. Debt consolidation is essentially combining all the debt from different sources into a lump sum, thereby simplifying pay off terms as you are no longer tied to multiple monthly payments.
Secured and Unsecured Loans
Loans fall into these two general categories. Secured loans are protected by the borrower’s asset(s) as collateral. This asset is used as collateral and lien is placed on it which means that the lender has the legal right to obtain and sell such an asset in the case of default of payment by the borrower. Due to the attached asset, the risk level is equally shared between both parties, and interest rates are fairly lower. Examples of secured loans include mortgages and motor vehicle loans.