Being able to manage the amount you receive per month of salary, your debts, your loans and other transactions that are carried out throughout the month is not a simple task.
For the vast majority of people, especially in Brazil, that there is a much larger consumerist culture, Financial Education is a discipline that should be paramount in the education process of schools.
Even those who have a slightly greater facility to carry out their financial management, the wrong thinking where financial management is knowing how to make money is quite common, and to make it clear, they are not synonymous.
Financial management has as main objective to keep the family economy healthy without risks or losses as a result of the crisis or any other problem that may appear halfway.
Understanding the concept of personal financial management
We can understand as personal financial management the process of analysis, planning and decision making in terms of controlling your monthly budget.
Healthy financial management is one that has a balance between your expenditure and your income.
It is important to say that there is no one who has managed to get rich by spending more than he receives, so it is necessary to have control of your inputs (earnings), and essentially the outputs (expenses), so that you end the month without problems, as we usually do say, in blue.
Keep in mind that good financial management is not about bigger gains, but about the correct distribution of resources, and especially the way in which you spend your money.
Financial management: how to do it efficiently?
For you to have a positive result in financial management, it is necessary to take into account all expenses that are incurred, including those that appear to be small, such as a snack, a cinema or something like that.
Therefore, it is important that you devise a plan that is effective so that you can have a realistic assessment of what are the important expenses and those that are unnecessary.
Start your evaluation process with your total expenses and your monthly income, where you will need to check all the gains and what the expenses are, even the coffee in the late afternoon and the beer from the weekend must also be included in the account of expenses.
Identify all expenses that are important, such as: water, electricity, telephone, internet, cable TV, transportation and meals. That done, it’s time to separate the expenses you have in the medium and long term, such as: loans and installments. Finally, identify all leisure expenses.
That way, you will be able to find the expenses that are not important and those that can be controlled, thus getting a good visibility of what needs to be done. From that moment on, you need to be able to open all your possibilities.
Start by depositing a fixed monthly amount in an applicable profitable one, savings used to be the best option, but times have changed, so it is necessary to look for another form of monthly income.
Evaluate the possibility of having life insurance, seek to settle your overdue debts and negotiate your credits. These are some measures that are necessary for you to be able to balance your budget.
The great advantage of efficient financial management is that you are able to identify what your expenses are and what areas need a little more support.
If you need help with something unscheduled, try to set aside a small reserve for the renovation, either to change a car or your home. You can still make this reservation to invest in a course for your personal growth.
Tips for carrying out your personal financial management
In order for you to be able to organize yourself in a more practical way, we have separated some essential tips for you to start improving your financial health today, check out the following:
- Control of all expenses
- Set goals and priorities
- Control your impulses and review your extra expenses
- Plan investments
- Use your credit card wisely
1 – Control of all expenses
It may seem like a cliché tip, but it is the most efficient. You need to write down any and all expenses with purchases and paid slips, including that bagel with coffee before entering your job. You can put it in a simple spreadsheet with fields that discriminate expenses, with date and amount, it is important that this spreadsheet is with you during the day, it can be directly on your cell phone or an application.
This control can make you discover something that you haven’t yet realized, which are the little things that are taking your money away. It is important that your spreadsheet is organized by month so that you can compare with the previous months and be aware when the expenses exceed a certain limit.
Keep in mind that the main objective of this monthly control spreadsheet is to be able to monitor all expenses, identifying what are the possible cutoff points within your budget, and another point that is in need of special attention, such as arrears.
2 – Set goals and priorities
In order for all of your effort to create and fill out your spreadsheet to really make sense, you need to establish your goals clearly, aiming at the savings you want to achieve within your budget.
Goals need to be set in a manner consistent with your financial situation, where you need to be determined to eliminate non-essential expenses.
The goals that will be established need to have a reduction limit, for example, I want to reduce 10% of non-essential expenses in the first month, in the second, this goal can rise to 15% until reaching the expected limit so your accounts are balanced.
Do not try to reduce it in the first month, as a sudden change may not help to contain consumer impulses.
3 – Control your impulses and review your extra expenses
It is important to get control of the shopping impulse, especially when you don’t need an item, as is the case with clothes, shoes, bags and other treats that are not needed at that moment.
After a brief period of reflection, it is time for you to assess whether the purchase of that item really fits into your planning. At this point, you can already identify what your expenses are superfluous.
4 -Plan your investments:
Now that you have identified the unnecessary expenses, it is time to take a new step towards efficient financial management, we are talking about investment. With all the planning done, at the end of the month there is money left, with all bills paid and everything up to date, what to do?
You need to invest that money, in investment funds, direct treasury or other resource so that it is possible to make that money have some kind of return. You can even think about securing your retirement.
Saving is one of the most sought-after methods, but it pays very little and has not been the best option for those looking for income.
5 – Use your credit card wisely
One of the biggest causes of default in Brazil is the credit card, as it usually grants a false sense of money, and leading many people to the trap of endless interest. Therefore, it needs to be used wisely and with a lot of strategy, it can be very interesting if there is a discount program or miles associated with its use.