I love to have money and spend it, but how in the world can I maintain a balance? Sometimes, my life is torn between fulfilling immediate desires and saving for the future. Why is managing personal finances so crucial? Well, doing what you want typically requires money, and acquiring money involves either winning the lottery or mastering income management. So, how challenging is it to manage your personal finances effectively?

In order to maintain good financial health and happiness, one needs to possess financial management skills. In this post, 10 tips on managing personal finances as a Finance Manager.

Set Personal Goals and Develop a Clear Strategy

Similar to any business, setting goals and strategies is essential. Just as successful companies review short and long-term goals annually, individuals also need to define clear objectives and craft a strategy to achieve them. To establish financial goals:

• Dedicate a weekend in December to outline your life aspirations, including financial targets like saving for a trip to Paris.
• Ask specific questions for each goal:
•  What do I want?
•  When do I want it? How long can I wait? When can I achieve it?
•  How much money is needed?

After answering these questions, assess your current financial situation. This self-evaluation, personalized to your circumstances, supports a clear understanding of goals, timelines, and present financial standings.

After you analyze your present situation, a strategy will resurge and this is how you manage personal finances. For example, if you need to save money to go to Paris next September, then maybe you need to live a more frugal life to afford the trip. Or maybe, you just want to pay off your debt to have more freedom with your money, hence you need a method to help you to focus on that.

Either way, you will have a strategy. Goals and strategies are like Bonnie and Clyde! Always together! You can’t have one without the other.

Write your goals and strategies

Have you ever visited the corporate offices of big companies? Well, if you haven’t this is what you are going to see: goals, values, and hints of strategy written or publicized in some way all over the place. Why? Because we are visual. If we see it every day, it will be easy to remember and do it.

Big corporations prominently display their goals, values, and strategies to foster a visual reminder for employees. Emulate this practice by recording your goals in visible areas at home, work, or in your car. Utilize creative options like felt boards, magnetic letters, or chalkboards that blend seamlessly with your decor.

Monitor your cash flow

Regardless of your goal, maintaining liquidity is vital. One of the biggest challenges in one of my jobs was to convince management that cash flow was the most important metric of measuring liquidity. I also believe that in personal life.

You need to have a clear understanding of how you use your cash and from where is your cash generated, in order to fix problems, plan for the future or simply to live. By understanding your spending habits, you can change them if necessary.

Understanding the origin of your cash and expenditure is crucial for identifying issues, planning for the future, and sustaining your lifestyle. Categorize your cash flows into:

• Operations: Income generated from activities like your job versus expenses for necessities.
• Investing: Additional income generated from your assets.
• Financing: Money acquired from loans and payments to settle debts.

If your balance of cash is positive because of financing activities, you might have solvency problems in the future. Opposite, if your cash flow is mainly generated by your operations it means that you have healthy but not taking advantage of financial products. If your cash flow is mainly generated by your investing activities, congratulations you have accumulated enough assets and can try to make a living out of it.

Strive for a balanced cash flow across these categories to ensure financial steadiness.

Have a Contingency Plan 

In the financial world, a contingency plan is a detailed document of what to do when unexpected things happen. In managing personal finances, it comes as an emergency fund.

Allocate a portion of your income (e.g., $10 to $20 monthly) until you amass at least $3,000 as a safety net for unexpected situations.And don’t use it, until necessary.  If you have more disposable income increase it at your own evaluation.  After you use it, once recovered, start saving for one again.

Have a Budget

A budget is a key tool in business, but also to manage personal finances. The key to a good budget is understanding your basic needs and real spending. In order to know this, you need to write down how you use your money.  This process helps to compare and evaluate, what things you can reduce and what items you don’t necessarily need.

In writing down your expenses,  try to detail even what you purchase in the supermarket, closest pharmacy, or every time you stop at the mall. Also, how much you spend on gifts for birthdays for family and friends, dining out and so on. Write everything. Then estimate a budget, analyze it, decide on the things you can let go, try it for a month, evaluate, and continue. If you do it for three weeks, and then three more, and so on, you can change things sustainable in time.

Create and adhere to a budget to manage personal finances effectively is what most Finance Manager do for big companies. The key is to track your expenses meticulously, offering insights on areas for reduction and identifying essential expenditures.

Minimize Financial Risk

This concept is easier than it reads. It simply says be aware of the danger, and here are some tips of how to that in the personal level:

• Identify your real needs.
• Understand your debts and types of debt, for example, if you have credit cards, look for the one that has the least charges or that fits with your lifestyle.
• Reassess the benefit value vs luxury and social value of things.
• Follow the Mary Condo method, but instead of de-cluttering your house, do it with your finances and spending habits.
• Look at bank promotions. Evaluate your current products with the new ones and check if it can reduce your risks (a.k. interest). However, remember not all bank products are good financing options, and not all of the bank’s officers look for your financial well- being. Ask for advice from people you know care for you.

Effective Finance Managers manage financial risks by recognizing genuine needs, understanding and optimizing debt structures, evaluating expenditure value versus luxury, decluttering financial habits, and exploring beneficial bank promotions for improved financial health.

Analyze market trends

To measure its market share, businesses usually compare themselves to the competition, but not to copy or “envy” them, but to get better. Moving this concept to personal finances, we usually desire a different life; a different work, a different house and so on. But, we stay in the comparison part and never go beyond what’s needed to actually change it.

We need to look at market trends (“the life we want”) and take steps to get there. If you don’t have an ability in your job, educate yourself, take a class, and improve. And so on.

To enhance personal finances, observe market trends towards achieving desired goals. Seek growth opportunities through education, skill enhancement, and strategic career moves.

Define/reassess your strategies and execute

At the end of the year, have an I to I conversation with yourself of what went wrong and why. This is also how you manage personal finances. Analyze what did you do right and repeat it. Evaluate your financial goals, see what you accomplish, what didn’t go as plan and change the actions. If you did everything, raise the bar. Life is an ever-ending circle.

Periodically review and revise your financial strategies based on past performance. Identify successful approaches, rectify shortcomings, and set higher benchmarks for continuous growth.

Closing Thoughts

Managing personal finances echoes the principles of managing a successful business. Through strategic goal-setting, disciplined budgeting, and informed decisions, one can attain financial stability and secure a prosperous future.