Finances are an important part of every American’s life. Keeping track of finances is not something that most people know how to do, but they should. Keeping track of finances can be an easy way to save money. While some people decide to hire financial agencies, others would rather save time and money by keeping track of personal finances themselves. Here are a few ways that the average person can keep track of their personal finances like the pros.
Budget Your Finances!
Budgeting involves tracking all household income and expenses to then figure out how much is left over- once the rest is allocated towards necessary expenses. Some people keep a budget by writing in a journal or keeping a log. While others may prefer budgeting through a spread sheet on their computer. To easily track spending, keep all of your receipts, (online and paper ones), and all of your paystubs. Once a person knows exactly how much they make and are spending, they may be able to find small or even big ways to cut down on spending.
Know the Interest Rates on Your Debt
Many Americans have some type of debt that collects interest. Sometimes this interest is annual, most times it is collected on monthly terms, while for others some combination of both. Most people don’t consider interest as an expense when trying to track their finances- but interest should definitely be considered an expense. The interest is usually a percentage of whatever the borrower has to pay back. If you find that interest rates on your credit cards or loans are extremely high, it is best to pay off the balance as soon as possible. It may also be helpful to speak to the initial lender about lowering the interest rate. Some people may want to look into finding a new lender, with lower interest rates to consolidate debt.
Know Your Monthly Bills/ Subscriptions
A person can set up monthly bill payments or subscriptions that are paid to a business for their services. These payments typically go through every month from a bank account. What happens is that, when most people begin these subscriptions or automatic payments (because they are not setting up the payments themselves each month) they forget about these as an expense. It is important to keep track of what services a person is being charged for and if they are still using that service in the first place. For bills, it is important to make sure the charge is correct.
Check Your Credit Reports Often
Credit reports are huge aspects of a person’s finances. In the United States there are three major credit reporting agencies. A credit report showcases the financial habits of a person. Financial history like payment history (on bills and when repaying debt), the type of debt taken out, the amounts borrowed, the amounts paid back, etc. Checking a credit report offers the advantage of understanding what kind of spender you are. Having a person’s finances visualized can be a great tool when trying to keep track of, or improve, personal finances. It is recommended that a credit report is checked often for mistakes, and because credit reports can show the first signs of identity theft.
Set Short Term or Long Term Personal Financial Goals
Once a person knows exactly what their budget is, setting up short term and long goals is crucial. This is because finding a smart way to spend, save, or invest money is an important part of keeping track of personal finances. An example of a short term goal could involve eating out less to save money, while a long term personal goal could be to save enough money to put a down payment on a home.
The Next Best Thing to a Pro, Personal Financial Software
In 2018, there are many personal financial software programs out there. This software can make keeping track of personal finances extra simple. Personal financial software can do everything from helping you manage money, to figuring out and setting up short term or long term goals. There are many trusted software products out there, and it is easy to do research before committing to one. Often times financial software have some sort of fee associated with them, but are usually a cheaper option than going to a professional. In addition, they may teach a person financial tools that they could not have learned on their own, tools which can be translated to other financial aspects of their lives.
When people think of tracking their finances they think about going to a pro. Often times, this can be expensive and time consuming. There are many ways in which the average American can track their personal finances themselves. From budgeting to finding helpful financial software, there are many solutions for those who want to take a crack at learning the skills to manage finances. Keeping track of personal finances can do more than just save a person some money. Many people find that it is extremely empowering to be able to manage their financial situations by themselves. Additionally, they find that it helps them reach financial goals they couldn’t have otherwise reached before.