Today, every person has access to convenient solutions for instant payment for goods and services online. This greatly simplifies life and brings joy and comfort. However, to spend and save money wisely, planning and control are necessary, and there are tools for this as well. This article is devoted to the principles of financial discipline. You can also improve your experience of interacting with money using Rates – all about finances service, which will help you understand payment systems, Bitcoin, Ethereum cryptocurrency, and bank cards.
What Is Financial Discipline?
Financial discipline is when you
- know how much you earn and what you spend on;
- know how to save money and increase it;
- has no fear of unexpected expenses;
- you can fulfil your financial desires;
- are ready in advance for all mandatory payments;
- do not limit yourself by waiting for your salary;
- get profit from your savings;
- are confident in the future and ready for change.
Rules for personal finance:
- Accounting for income and expenses by categoy. This is where you need to start. To plan your finances, you must understand how much money is coming in and how it is being spent. Today there are many accounting applications, so there is no need to count manually. They will clearly show how much money you could save by eliminating unnecessary expenses. Usually, this figure is shocking. Sometimes banks provide such instruments. If you are a Bank of America client, you can ask whether the bank has such a tool.
- Prioritization. You can't say you're managing your personal finances if you're only recording your income and expenses. You do not control finances but only observe. The main principles of money management are goal setting and prioritization. You must know what you want to achieve and spend money only on what you need, avoiding pointless spending.
- Budget planning. Once your priorities are set, you can begin your plan and allocate your available money according to your goals.
- Analysis. There is a high probability that there will not be enough money for all goals at once, and the goals themselves will change over time, so the plan must be constantly adjusted. In addition, even if you have enough money, you will need to regularly optimize your expenses and savings.
- Creation of savings. At least 5-10% of income should be sent to the piggy bank. This is an important rule for anyone who wants to not only earn money through their labor but also receive passive income.
- Investment. Money must work. Otherwise, they will depreciate over time. You can explore different investment approaches or turn to professionals. Such a strategy should be individual and consistent with your goals.
- Insurance. This is a very important point that ensures the financial security of your entire family during a crisis – property, life, health, and performance insurance helps soften the blow to finances in case of unforeseen circumstances. You can contact Aetna or Aflac for these services.
How to Manage Your Family Budget
How to manage personal finances is more or less clear, but what to do with the family budget? How to properly manage finances when not only personal interests are affected, but also the needs of several people?
There are many ways to manage a family budget, but they all follow the same rules:
- distribute responsibility for financial tasks or appoint a manager, defining his rights and obligations;
- jointly set priorities and plan the budget for the period so as not to infringe on each other’s needs;
- take into account the financial goals of each family member and divide them into general and private;
- agree in advance on the amount of everyone’s investment in common goals;
- determine the categories and limits within which common money can be spent without approval;
- increase the financial literacy of all family members.
Techniques to Help You Better Control Your Finances
There are simple but effective techniques that allow you to assess your financial situation and refrain from unplanned expenses.
24 Hour Principle
Before making a large purchase with your favorite Visa card, wait 24 hours. This helps avoid impulsive decisions and promotes a more balanced approach to spending. It is better to set in advance the amount from which the purchase will be considered large.
Challenges
Conduct one “what would happen if…” experiment per month. This is a great way to test out healthy financial habits in a fun, stress-free way and evaluate whether you need to implement them on an ongoing basis.
For example, what will happen if within a month:
- do not order food delivery;
- don't buy coffee;
- control electricity consumption;
- cancel all subscriptions;
- don't take a taxi.
“Inversion” Method
As you plan, try thinking about how to avoid financial mistakes instead of striving for success. For example, replace “you need to save $50 a day” with “don’t take a taxi from work instead of the subway.” This approach helps you make more informed financial decisions.
Pocket Money
Perhaps you're slipping and spending money beyond your plan because you're putting too much pressure on yourself. Set aside an allowable amount for unnecessary expenses to treat yourself a little. Create a separate account or card, transfer your pocket money to it, and spend it depending on the desires that bring you joy.
Financial day
Pick one day a week to assess your financial health. Review your banking transactions, analyze your spending, and plan for your next week. To avoid missing this ritual, create a pleasant association associated with it. For example, this can be done while drinking tea or while listening to pleasant music.
Conclusion
Budget planning and proper handling of finances allows you to maintain a stable standard of living and cope with emergencies with dignity. If you regularly carry out currency transactions and are looking for a reliable service for tracking exchange rates (dollars, euros, and others), we recommend paying attention to the Rates.fm service. It is available around the clock, no matter where you are – in Montreal, Houston, or Berlin.
