At the beginning of the month spending comfortably, at the end of the month, spending is unearned. The reason lies in how you manage your personal finances, not how much money you have. If your business has its own department to manage your spending, you should also know how to manage your own spending.

Do you know how to manage your personal finances?

1. What is personal finance?

Personal finance is all revenues and expenditures related to money for families and individuals, including: income, spending, savings or investments… To understand more simply is to find a way to use the money you have in the most effective and correct way.

2. Why manage personal finances?

Personal financial management has a significant impact on expenses, investments, savings for yourself and your family. This brings a number of benefits such as:

• Manage to know your cash flow
• More stable finances
• Easily achieve your own financial goals
• Be proactive in all cases
• Limit and control debt
• Increase in asset volume
• Improved personal standard of living

Personal finance management saves you from running out of wallets at the end of the month

3. 2 ways to manage your personal finances

3.1 Personal finance management method 50/30/20

• 50% of total income for necessities: Fixed expenses such as electricity, water, gasoline, food or rent… To determine the most accurate of these items, you can track invoices, spending history of previous months.
• 30% of total income for flexible expenses: Expenses for this item include: shopping, expenses incurred, entertainment … If possible, you should limit your spending to this item because it is not an essential spending item and sometimes you are just shopping according to your feelings.
• The remaining 20% for accrual: This is the money that buys peace of mind for you and your family. However, if the financial situation is not too stable, you can consider testing first about 10 or 15%, then gradually increasing. If the flexible cost group is reduced, your cumulative group will be able to be increased.

3.2 Personal finance management method 6 jars

The 6-vial method is a more detailed version than the 50-30-20 method introduced above. You will divide the amount of your total income into 6 different parts to use for essential purposes: essential, saving, learning, enjoying, investing, and charity. The 6-jar rule is usually for beginners to practice personal financial management.

The principle of dividing finances into 6 parts will help you manage effectively

4. 4 Principles of effective personal financial management

4.1 Determine budget sources

First, list all the sources of income that you have. But remember that the revenues are fixed, and the more detailed they can be, the better. This is a basic step for you to calculate as well as allocate spending appropriately.

List all the fixed budgets you have

4.2 Limit credit card abuse

If possible, don’t use a credit card. Large card limits, attractive offers for people paying via credit cards will easily make you “overdone” by shopping. And if you have missed it, control it strictly.

4.3 Use idle money to invest profitably

Idle is your savings or provisions. It doesn’t matter if you keep it in account. However, if you are skillful, you can get extra income if you invest in this currently “idle” money.

There are many different types of investments that you can learn about over the Internet or inquire about the relationships around you. However, have you ever heard of investment-linked insurance? This is an insurance product that many customers love and choose more than other insurance products at Generali. The reason is that you can both invest profitably and protect your loved ones in health problems.

4.4 Ensure 3 elements: Compliance, patience and flexibility

Making sure to follow financial management principles will have a huge impact on the results you get. And of course to be able to have good results, you also need to patiently perform for a long time.

All ways of managing spending are also theoretical. You have the flexibility to change your expenses depending on your family’s financial situation or your own needs. Don’t be too rigid, which will make you easily discouraged because the funds distributed are not as “formulated”.

List all the fixed budgets you have

5. 5 tips to help you manage your personal finances better

5.1 List financial goals in as much detail as possible

List all the financial management goals you want to achieve. And remember to be as specific as possible, then sort by these priorities:

• Short-term goals such as saving enough to travel
• Long-term goals: paying off debt, retiring early or buying a home…
• Short-term goals: minimize spending, limit or not use credit cards
• Set clear priorities for your goals so that your financial plan is as detailed as possible.

Financial goals need to be specific and clear

5.2 Develop a suitable personal financial management plan

Personal financial planning is always an important step for you to achieve your goals. To make the plan even clearer, you can add more implementation steps or milestones for easy tracking. The usual plan will include a goal of setting a monthly budget and clear spending plans, in addition to getting out of debt if available.

5.3 There should be no bad debt

Bad debts in the long run will cause many obstacles to your financial plans and goals. A few tips to help you quickly pay off your debt:

• Liquidate unused items to get more money.
• Find and do another overtime job where the repayment period is withdrawn.
• Look for possible temporary budget cuts to focus on repayment.

5.4 Seek expert advice

Financial experts will have a better perspective and more experience to be able to help you have the desire to invest from “idle” money.

Get an expert opinion if you don’t have a lot of experience

Each way of investing is somewhat risky, but depending on your financial situation as well as your needs, financial advisors will be able to assist you in investing in the most appropriate and low-risk way possible. If you feel that the experts do not trust enough, you can ask for experiences from previous people such as parents, siblings, colleagues …

6. Effective personal finance management tools

Use a notebook

A small notebook you carry with you to keep track of your expenses can help you take good control of your finances. Or if you can actively write down in advance the items you intend to spend better, then just add the actual amount.

Use a book to keep notes on expenses

Financial management with Kakeibo books

Is a method widely used by the Japanese. Every time you intend to spend, you must answer 4 questions to be sure of your spending. Comprise:

• How much money do you have now?
• How much are you looking to save?
• How much money will you spend on this?
• How do you improve your spending?

Take advantage of the financial management app on your phone

The method is the same as the first method, but instead of writing it down in a notebook, you will do it through the financial management app on your phone will know your overview income and expenditure chart.

In short, the way each person’s personal finances are managed will not be the same. And you can also flexibly change how to suit your living standards and needs. What you need to remember is to make a plan right away and stick to it long enough, at least until you’ve paid off your debt and have enough spare money.