expenses are not managed wisely.
For people who are living independently for the first time, the
responsibility of paying for their utilities aside their personal
expenses can be burdensome if not managed appropriately.
Professionals say the effect of inadequate financial planning may not
be felt immediately, but later when there is no steady source of
income.
They note that understanding how to manage finances will not only help
people out personally, but can be of benefit when it comes to business
success as well.
A proper financial understanding, according to experts, also helps in
setting goals as well as creating fundamental skills in planning and
decision-making.
Learn financial management
The Faculty Director, Soar and Heritage, Mr. Sola Adeyiga says a fair
understanding of accounting, bookkeeping and finance can change the
fortune of any business.
According to him, every business owner must have at the click of a
mouse, his company's key financial data such as values of receivables,
current inventory level, monthly revenue, monthly profitability,
business net asset and balance sheet size among others.
He says, "If you are a business owner and you cannot provide these
data about your company in minutes, then you have some work to do.
"Even if you decide to employ an Accountant or outsource the finance
function, it is still essential for business owners to have fair
knowledge of finance. You can attend short courses and relevant
seminars or read finance related articles online. It will really
help."
Stick to your budget
Experts say budgeting is a means of balancing expenses with income. To
make it work, they advise that a realistic budget should be developed.
According to them, budgeting can best be achieved by tracking how well
it is being adhered to each month, which means a continuous tracking
of your monthly expenses, coupled with your day-to-day spending.
As part of an effort to adhere strictly to the budget, they advise
that people should think in terms of their overall accomplishment
rather than something that will give them temporary satisfaction.
Control impulsive spending
Impulsive spending according to experts is an act of spending money on
items that were not in the original budget. Experts say people who are
in the habit of overspending on items or making late payments for the
items bought, frequently borrow money from friends and buy things they
don't really need.
Financial advisors also say stress often leads to impulsive spending.
Therefore, they recommend ways of reducing stress as a remedy to
impulsive spending.
To achieve this, they say take inventory of your regular monthly bills
and make reminders for yourself on when each bill is due. They add
that the best approach is to pay bills as soon as they arrive.
Have an emergency fund
A specific amount should be set aside for emergency situations,
experts say, because it is when unforeseen expenses or emergencies
arise that people tend to spend out of their budget. This can be in
form of a budget out of the monthly paycheck for deposit into a
savings account, ideally at least 10 per cent of each month wages,
including extra money earned.
According to financial advisors, the advantages of doing this is to
prevent the necessity of going into debt, it provides peace of mind
and freedom of choice.
These funds, they say can be kept in a readily accessible account but
keeping in mind that it does not necessarily need to provide a high
return.
Explore insurance policies
Financial advisors say insurance is an important tool for protecting
against financial hardships, and the premiums paid may be one of the
top household expenses.
For guidance, they advise that interested parties should seek a
provider to be sure they have the appropriate level of protection -
that way they will prevent exorbitant payment for coverage.
Diversify your investment
According to investopedia, it is important to create a personal
virtual mutual fund by investing in a handful of companies you know,
trust, and perhaps even use in your day-to-day life.
Experts say investing can be educational, informative and rewarding.
By taking a disciplined approach and using diversification,
buy-and-hold and dollar-cost-averaging strategies, you may find
investing rewarding - even in the worst of times.
Money can also be invested in different types of investment such as
banks certificate of deposit, stocks, bonds and real estate, experts
say.
Have a retirement plan
Having a solid retirement plan, according to financial analysts can
erase worries and fears related to old age, and keep people in control
of their life and their finances. They say it is an act of preparing
now in order to enjoy later.
Continue..
ReplyDeleteAccording to them, the retirement plan should include social security, medical insurance and good lifestyle choices.
They advise that the monetary deposits for retirement should begin early so as to save a substantial amount before retirement age. For people in salary employment, if there are plans by their employers for retirement, they should take time to learn of their rights, experts advise.
However, for those who are self employed, an appropriate plan should be sought as soon as possible.
According to a businessman, Mr. Ibrahim Adeleke, small businesses are not under compulsion to buy insurance policies or have pension plans, but it is good to have a plan for life after retirement.
He says, “Most people profess that their children are their greatest investment, as such they expect their children would give them support in their old age, but experience has shown that things don’t really go as envisaged. Investing in property that would bring in income in form of rent has proved viable for me.”
—PUNCH