Smart Ways to Manage Your Personal Finance During Tough Times - Parthian Securities - Your Smart Brokerage Firm

Times are hard lately as the cost of living keeps rising without a relative increase in income. If you find yourself struggling to survive with the same income you’ve been okay with, you’re not alone. The key to surviving this period is to follow some basic personal finance rules you may have ignored in the past. Here are some basic personal finance principles you can apply to stay financially stable during this period.

1. Keep it simple

The more investment accounts you have, the less attention you can give to each one, and the more likely it is that you’ll miss a big problem.

2. How much is your time worth?

Figure out how much you earned last year after taxes. Subtract from that all of the costs of commuting and other expenses you paid out of pocket. Then, figure out how many hours you worked, plus the hours you commuted and attended other business meetings. Divide your after-expenses income by your total hours of work to get your true income value.

3. Renting vs. home ownership

Rent, unless your total monthly cost of home ownership is lower than renting. It’s easy to get sold on the homeownership dream, but if it’s going to jack up your bills, it’s probably not a wise move. 

4. The 10-second rule

Whenever you’re tempted to splurge on something, simply hold it in your hand for 10 seconds and ask yourself honestly whether you need it or not. Try to think of reasons you shouldn’t buy this item. Will you really get enough value out of it? Usually, just 10 seconds will convince you that you don’t really need the item, but if it passes the test, feel free to buy it!

5. Build the right budget

Build a budget based on your actual spending over the previous few months. Get real numbers, not estimates. Dig through your bank statements and credit card statements and figure it out. This will easily show you the areas where you actually overspend.

6. Cancel unused memberships and subscriptions.

Unused subscriptions and memberships do nothing but devour your money month after month. If you’re too busy to watch TV, keeping your Netflix and DSTV subscriptions is a waste. Cancel and renew when you need to use them.

7. Invest in stocks and hold

Money in stocks, over the long term, tend to offer very good returns, but stocks are very volatile, with lots of short-term jumps and falls in value. However, stocks become profitable if left for the long term. So, hold on and be patient.

8. Spend less than you earn.

Spend less than you earn and put away that difference for the future so that you can still survive and thrive when you’re older and don’t have the opportunities and energy of today. Without your earnings being greater than your expenses, you simply cannot achieve big financial goals without some sort of miracle – and you should never bet your future on a miracle.

9. Have an emergency fund

You certainly should have an emergency fund sitting in a savings account always because an emergency can happen anytime. You can start building an emergency fund by setting up an automatic weekly or monthly transfer from your salary account to your savings, then leave the savings alone until an emergency rear its head.

10. Reduce investment losses with fixed income investment

It’s good to have at least some of your money in safer investments like highly rated bonds and FGN Treasury notes. Fixed income investments tend to increase in value steadily over time and are far less volatile than stocks. However, if you have a very high-risk tolerance, or you’re young and your financial goals are still quite distant in the future, this may not be very crucial.