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How to Manage Personal Finance

Money has various influences on human life. There are those who choose to be frugal, there are also those who have difficulty managing their finances to make the money run out quickly. A good way to manage personal finances is to minimize expenses and maximize income, so that life in the future will be more secure.

Well, for those of you who are single or not yet married, it's a good idea to start trying to manage your finances better. Try following the methods below!

How to Manage Personal Finance
How to Manage Personal Finance

1. Create an Expenditure Budget

The first way that you can do to manage personal finances, both with small and large salaries, is to make an expense budget. Making a spending budget doesn't need to be difficult, the most important thing is that you must be able to prioritize your spending first.

Setting priorities will help you allocate income more easily. Some of the prioritized priorities include daily expenses such as monthly bills and shopping needs. After that, prioritize debt installments (if you have one), and you can allocate the rest for investment savings, emergency funds, and social funds (such as zakat or tithing).

2. Record All Personal Income and Expenses

Without having personal financial records, of course we will not be able to manage finances properly. Routinely or accustomed to recording personal income and expenses has many uses and is one of the first steps in managing finances. You can track which posts our income is in, so that in the future we can know whether there are expenses that we can reduce or increase in nominal terms as needed.

This method is also useful for designing our financial goals. For example, you have a goal to buy a laptop in the next three months, so you can plan from now on by saving the money in advance. You can also estimate the amount of savings that you need to spend each month so that these goals can be achieved within a predetermined time frame according to your financial capabilities.

3. Use the 50/30/20 . Formula

Well, if you want a more detailed and detailed way of managing finances, try following the 50/30/30 formula method, a la United States senator Elizabeth Warren, which is quite popular. This method requires you to break down your net income into three large sections, with the following explanation:

Set aside 50% of income for daily needs and mandatory bills, ranging from shopping for daily necessities such as food and toiletries, to medicines, also included in this calculation. In addition, also include mandatory bills such as electricity, water, insurance, or other installments that have not been paid off. Calculate well, are your daily needs and bills enough with 50% of your income? If it turns out to be overspending, then you can replace some items at a cheaper or more economical price.

Set aside 30% of your income for entertainment and other purposes, so you can still enjoy your free time with vacations, buy things you like, or want to develop yourself by attending training and workshops by preparing the budget early. So that doesn't mean you can't have fun if you want your finances to be secure.

Set aside 20% of your income for savings and investments, whether in the form of an emergency fund, things or items you want to achieve/buy, retirement funds, or even investment capital.

4. Pay Debt & Installment On Time

Debt-free is one of the main factors that make your finances more secure and comfortable, because you have no other burden than your daily living expenses. You will also avoid stress or the risk of being involved in an endless vicious cycle. Debt behavior is usually triggered when you have a need that cannot be met by your daily income, or even when you are unable to pay your debt, you can go into debt again to pay it off. As a result, you will be trapped in a debt trap that is getting bigger and bigger.

To get out of debt immediately, the first thing you have to do is control it and try as much as possible to get rid of the possibility of debt. If your debt is in the form of a credit card or other loan, be sure to choose one that doesn't pay interest. You can also combine several debts in one place, so you don't have to worry about breaking down your income at the beginning of the budget. Don't forget to always pay the installments on time, don't wait for it to be paid off quickly!

5. Press Consumptive Expenditure

If we discussed debt earlier, this one thing is directly proportional to the wasteful or consumptive life attitude. Consumptive debt will make your wallet tighter, so many experts and financial planners don't recommend it. Minimize the consumptive expenses you have, as much as possible, keep it in mind to always buy the things you need, not what you want, and at an affordable price.

6. Allocate for Emergency Fund

What should not be forgotten in managing personal finances is setting aside some of your income for an emergency fund. An emergency fund is a very important amount of money to anticipate an emergency or unexpected situation so that it does not affect our financial condition. The nominal emergency fund is adjusted to your financial capabilities and spending priorities, but ideally for those of you who are not married, you need to collect 6 times the total expenditure per month. Keep in mind that emergency funds and savings are not the same thing and don't touch or take funds from savings or income for unexpected expenses.

7. Have Health and Life Insurance

Having health and life insurance is a very good investment. Unfortunately, many people still feel at a loss because they always pay for insurance every month but never feel the benefits. In fact, what must be instilled in the mindset is that insurance functions like an umbrella that can protect us from rain or scorching heat. We never know when the rain or heat will come, but we need to be on guard by preparing an umbrella.

Herein lies the importance of health and life insurance. With the rising cost of health care, you can get medical or treatment costs and focus on healing without having to think about finding money to pay for it.