When it comes to improving our personal finances, we have many alternatives on hand. They all sound easy on paper. But, when the time comes to put these financial decisions into practice. Countless excuses arise that keep us from prospering economically.
That is why if we want to positively impact our bank account. We will not only have to make a series of important financial decisions. But, we must also give up those excuses that have stalled us.
Financial Decisions to Improve Your Personal Finances:
In this article, we will share those financial decisions that will have a positive effect on your finances. Some of them require you to change your habits. Learn to generate passive income. Change your mindset, among other changes necessary to change the course of your finances.
Each of these financial decisions will put you in a favorable position. Since you will not only learn what types of debts exist? Also, the importance of your credit history. But also put your personal finances as an important topic in your life. Therefore, you will dedicate a greater part of your time and dedication.
While these decisions are not easy to make, they will certainly be worth a try.
1. Spend less than you earn:
This is one of those financial decisions that you usually find in most personal finance articles. But, that you hardly apply.
It is very easy to say that you will spend less than your income will be. And, it is just as easy to forget when you see those clothes that you don’t need. That new phone or that sudden trip.
However, when you have discipline and commit yourself. You can make the decision to stop closing each month in the red. To have to go to your savings to cover the unnecessary expenses you made during the month.
2. Get debts that generate income:
How many times have you told yourself? That, the reason you don’t start that business idea you have in mind is that you don’t have enough money?
When you really want to do something. Such as start a business. Ranging from starting a business with low capital or acquiring loans online that you can use to finance your projects.
Loans for business, or those you use to buy machinery, equipment, or tools, are considered as good debts. Since you will be generating income from them, and therefore, using the capital of a third party to leverage financially.
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3. Save before you spend a single penny
the millennial generation is characterized by being careful with their financial movements, even 83% believe they could save more money. However, many remain in the “consider”.
Saving a percentage of your income is one of the best financial decisions you can make. To start, you can save 10% of your income. Set aside this money before paying your bills or spending money to maintain your lifestyle.
If you find it very difficult to do so, you can automate this saving from your bank account. This way you will save money without realizing it, and you will have no excuses for not doing it.
3. Have a margin of error in your budget:
The first thing is that you must have a budget. Unfortunately, many people do not consider it lazy. Because, they do not know how to do it, or worse, because they do not understand what it is for.
A budget is a tool that allows you to keep track of your personal finances; starting from the income to the smallest expenses. When you have a budget you can keep track and control of expenses.
If you are creating your first budget, remember that this should not be extremely rigid. Since there are unexpected expenses and income that appear. The idea is that your budget is a guide, and not a straitjacket that limits you.
Based on this reality, one of the financial decisions that will positively impact your bank account. It is to maintain a margin of error in your budget. Money to cover an emergency, an unexpected expense, an unplanned date or event, among others.
5. Set financial goals:
If you want to positively impact your bank account, you have to know where you want to go. It is impossible for you to achieve your financial goals if you don’t have one to begin with.
Remember that a financial objective is not to want an increase in your salary. It is to define how you are going to invest the money you save. For how long and what rate of return you hope to achieve.
To start you can define three objectives; one short, one medium and finally one long term. Let’s take an example:
- Short term, that is to say in 6 months. You will commit to getting out of all the debts that are not generating income.
- Midterm, in 3 years. You commit to investing 50% of your savings in a fund that invests in the stock market at an average rate of 10%.
- In the long term, that is to say in 5 years. You will have your own apartment which you financed and covered with the income of the stock market. A part of your salary, etc. You can even start making real estate investments.
The more specific you are with your goals, the clearer your mental image will be and therefore the easier it will be to achieve.
6. Evaluate and measure your financial growth:
To meet your financial goals you must measure your financial growth. That which is not measured is not improved, and your personal finances are no exception to this rule of life.
Make the decision to evaluate yourself. Ask yourself what your financial performance was like.
- Spend your money on?
- What did you invest in?
- Were purchases done emotionally?
- Decisions that helped you achieve your goals, and what did not.
You can create your table in excel and measure your performance. For example, make comparative tables in your budget. Measure how the spending was on different items. Such as outlets, purchases, basic needs, investments and others.
These are the kinds of financial decisions that most people do not make because they are lazy. They are the same ones that complain about their current situation. They do nothing to change their current state of life.
7. Pay your bills and debts on time:
Before you start saving, the first decision you should make is to pay off your debts. Especially those that do not generate income and that have a high-interest rate.
The importance of this decision is to avoid paying interest in default. Which indeed little by little is bleeding your bank accounts and consequently affecting your personal finances.
Now, when you pay your monthly bills on time, or in advance. You have some savings that you could use as a margin of error in your budget. You could invest in the stock market and generate extra income.
8. Build a good credit reputation:
The previous point will help you build your credit reputation. The importance of this decision is that many times, it is better to have friends and a good reputation than money itself.
When you have a good reputation. That is to say that you pay on time, fulfilling your responsibilities. Your personal finances demonstrate it, many investment doors will open immediately.
Make the financial decision to pay your bills on time. keep your promises. Put the money you receive to good use. Look to the future. Be clear that much of life’s success comes from image and reputation. that you pass on to others.
When you have this philosophy of life, people will trust you. They will invite you to their businesses to invest in their projects. They take you into account in their financial decisions that will be reflected in benefits for your life.
9. Diversify your sources of income:
Regardless of how many zeros your salary has, don’t rely on a single source of income. The risk that you run when depending on only one, is that once it fails, your finances will be affected 100%.