Personal finance tips to secure your future

By Kamila Mushkina / August 27, 2020

The coronavirus pandemic has taught us that we should be prepared for an unexpected financial crisis. Besides having a financial cushion, what are other personal finance tips for a more stable financial future?

Track your spending

If you want to know how much money you need per month, you should find out how much you spend. Some people track their calories to find out how much they eat; you can track your expenses and see how much you spend on each of the categories such as rent, insurance, food, clothing, and so on.

You can use your good old bullet journal for that or simply download a money tracking app. For example, I’m using Money Lover, and there are plenty of others for iOS and Android. Most of them cost something, but if it’s a good app with easily adjustable categories and clear monthly reports, why not give it a try? Consider it an investment into your bright financial future.

When you can visualise your spending, analyse it: maybe you spend too much on eating out? Can you stop yourself from buying another pair of jeans? Knowing your spending habits will help you spend more consciously in the future.

Plan your expenses wisely

It’s not true that financial planning is only for businessmen and people with loads of money. Everyone should have a financial plan. You should plan your expenses. Calculate your essentials, such as rent, utilities, food, household goods, and so on. Subtract them from your monthly salary and think about the rest – it needs to be spent wisely.

I honestly think it’s better to earn more than to spend less. After all, we’re living today, and we should neither live one day at a time nor be obsessed about the future. We need to socialise, which often makes us spend more money than we would want to. When you restrict yourself too much, you become the type of person that can never forget about the two euros you’ve lent to your friend.

It is good to spend money on things you enjoy but make sure to not go over budget. For example, I really like tasty food and I’m not into make-up, so I’d rather go to a cafe than buy a new eyeshadow palette. However, if I spend too much on eating out, I will be over budget very quickly. If I limit it to once a month I will enjoy it more than if I go out constantly.

Save and know what you’re saving money for

Everyone knows they should save money, but why should they? It’s important to have a goal; otherwise, you get demotivated very quickly. Maybe you’re saving for a new smartphone. Maybe you’re saving for an interesting course you want to take. It’s even good to have multiple financial goals, short-term and long-term.

Save for your retirement. My parents started worrying about my retirement when I graduated from school. It seemed ridiculous then, but now I realise that it’s never too early to think about your retirement.

How should you save? Save at least 10% of what you earn. Once you’ve got your monthly salary, put 10% aside and forget about it.

Do not keep all your money in one place. You should not have easy access to your savings. Try to have them somewhere else, such as the credit union or the post office.

Set up a financial cushion and an emergency fund

Among other personal finance tips, this one is especially relevant in terms of the Covid-19 situation. No one could predict the pandemic. No one could be prepared for it, but you could have been prepared for an emergency and set up an emergency fund.

There is a difference between a financial cushion and an emergency fund. A financial cushion is a relatively small amount of money in your account that prevents you from spending too much and having an overdraft. If you set up a financial cushion of €1,000, you should have that amount untouched by the end of each month. When your account shows less than €1,000, you’ve probably not budgeted correctly.

An emergency fund, on the other hand, is the amount of money that would keep you afloat for months. The pandemic is an emergency. Your personal medical condition might be an emergency. Losing your job might be an emergency. In all of these cases, you don’t really know how long it will take until the situation changes in your favour, so it’s better to save for at least six months ahead.

These personal finance tips are crucial and will help you to achieve financial freedom. You should think about your personal finances now if you don’t want to worry about them too much in the future.

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Kamila Mushkina

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