Money in Our Life: 5 Personal Finance Basics to Work On

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• Tags: Budget, cash, Goals, life, money, Prosperity

Do you need to do better with your personal finances?

The money in our life is important to us.  It pays for our food, shelter, necessities and luxuries.  However, despite its importance, we often poorly manage it.  We fail to get the most from what we make.

Now is a great time to improve the way we handle our money.  There is never a better time than the present to make the necessary changes.  If you have money issues, then continuing down the road you are on is only going to dig you deeper into the hole.

It is time to revisit and apply some personal finance basics to the money in our life.

5 Ways We Can Better Handle the Money in Our Life

Being more successful with money is not hard and the advice I’m offering here probably isn’t anything you haven’t heard before in one place or another.  Improving how we handle money is a lot like improving our health.  We know what we should be doing.  The tricky part is to actually apply the principles we know in our everyday lives.

I’m reviewing these personal finance basics now in hopes that this will be the year that you’ll resolve to take action.  Here are five ways we can better handle the money in our life:

1.  Get Over Your Resistance to Being Held Accountable

Dave Ramsey says that 80% of winning with money is emotional and only 20% is head knowledge.  I believe him.  As Ron points out in The Top 5 Personal Finance Resolutions, you’ve got to get control of your emotions when it comes to money and act logically.

A big part of the hump you have to get over emotionally is allowing yourself to be held accountable for your spending.  This first step is really a doozy!  Most of us don’t want anyone telling us what to do.  We want to do whatever we want, whenever we want.  However, this is exactly the behavior that has gotten us into our financial mess.  You’ve got to conquer your own emotions about money before you’ll make any real progress.  Will you resolve to do this?

2.  Start Paying Cash for Everything

The truth is we spend more money when we pay for things with credit cards.  Cutting up our credit cards and paying only cash for the items we buy will help us to start living within our means.  It is going to be painful at first, but it will be worth it.  Check out some suggestions on how to make this transition in New Year’s Financial Resolutions: Resolve to Take Baby Steps.

Piling up more debt is unacceptable.  It will only make the mountain we have to climb to improve our finances that much larger.  You’ve got to cut the problem off at the root to get control and paying cash is one of the best ways to do this.  Again, it won’t necessarily be easy, but it will turn your life around.

3.  Create a Budget to Get Control

One of the most basics of basics in personal finances is to have a written budget.  A budget allows you to plan in advance each month exactly where you want to spend your money.  This keeps you from coming up short.  A budget will also give you insight into where money is slipping through your fingers.  Stopping this leakage is crucial to turning your financial life around.

Check out 31 Days of Organizing for a Better 2010: Create a Budget for some great advice on how to get started.  If you have a computer, then I highly recommend maintaining your budget electronically.  It just makes things much easier.  Personally, I use YNAB as my budgeting system and I love it. 

4.  Set Some Measurable Financial Goals

You are going to need some motivation to spur you on to success with your money.  The best way I know to get enthused about a task is to imagine what it is going to be like when things are done.  In other words, set yourself some goals for for what you want to accomplish and write them down.  Detail out exactly what you want to accomplish with your efforts.

You’ll find some great example goals in My 2010 Comprehensive List Of New Years Resolutions.  Notice that these goals are very specific, measurable and realistic.  This is important.  You want to be very clear about what you are aiming toward and have a good chance of reaching the objective.  This will aid you in measuring your progress and keep you from losing hope.

5.  Start Saving for the Future

Once you start to get a little traction with your money, then you need to start saving.  You want to sock back money for things you know you’ll need a chunk of money for in the future.  This includes things like retirement, the kid’s college fund and next Christmas.  This type of basic financial planning will ensure your needs are well met going forward.

It is never too early to start saving!  The sooner the better because you want your money to start working for you as early as possible to earn its maximum potential.  A great example of this concept is explained in Delaying Roth IRA Contributions One Year Could Cost You $74,000.  Don’t miss the opportunity to live like a king by delaying getting started!

Personal Finance Basics Will Revolutionize Your Life

These really are some of the most essential basics to winning with your personal finances.  Also, I can assure you that if you will apply them that you will revolutionize your life.  How do I know?  Because I’ve done it myself.  I was skeptical at first, but I can tell you that I’m a believer now.  There is more you need to know, but that will come with time.  Concentrate for now on the basics and you’ll make incredible headway!

What suggestions would you offer to someone that wants to do better with their money?

Photo by Kevin