This post is provided by Jason Dirkham.
There are currently too many people who go through their life understanding nothing about personal finance. Keeping your money in order, budgeting, and all of this might seem boring, and it’s certainly not the most fun thing on the planet, but the benefits that it has on your life make it worth every second you spend learning.
Of course, personal finance management isn’t a subject that is taught at school, and a lot of parents don’t have the time or the inclination to teach their kids. This means that most people grow up with no idea about how to manage their personal finances, or why it’s important to understand them. Today we’re going to be focusing on the latter, so if you’re interested in learning more about that, this article is for you.
It Can Help You Get Out Of Debt
Understanding your financial situation can help you to get out of debt if you have found yourself in it. Don’t be embarrassed because a high percentage of people will be in some kind of debt in their lifetime. Of those people, a large percentage are not going to be able to get themselves out of it, or if they do, they are going to struggle to stay out.
Having an understanding of your financial situation will ensure that you can get yourself out of debt, and then hopefully stay out of it. Getting out of debt doesn’t have to be that difficult, but it might take quite a while to see the results that you are hoping to see. This is going to depend on the level of debt you are in, what kind of income you are currently on, and whether you have any extra money coming in.
The best way to get out of debt is to call your creditors and come up with payment plans for them. This way, you will get the debts paid over time, and it’s affordable to you. As long as you remain consistent, make these payments, and don’t end up skipping out of the plan, eventually you will get there. Just make sure that if your financial situation changes, you inform them and amend your plan.
Once You’re Out, You Can Stay Out
Carrying on with the theme of debt, if you understand your personal finances a little better, hopefully you will be able to stay out of debt and won’t fall into the traps that you fell in the first time. We get that there are a lot of people who are in debt because they are on a low income and they needed money for something important which was pretty much unavoidable, but maybe next time you can formulate a plan to stop this from happening again.
If you sit down and make a budget, you will be able to see exactly what you need to pay, when you need to pay it, and how much money you have available for everything. If you are in a tight financial situation, you are simply going to have to cut the luxury purchases out of your life for a little while. Living beyond your means is not necessary, even if it’s tough, and it’s better to go without luxuries for a little while than end up back in debt.
You’ll Have Savings In Case Of Emergency
There are going to be times where unexpected expenses creep up and hit you in the face, and this can be a real problem. It becomes even more of a problem if it’s an emergency and you do not have the money to cover it because this is how so many people end up in debt. However, if you take the time to learn more about your personal finances right now, then you can potentially avoid this from happening, partially if not entirely.
When you make your budget and you study what you are spending, you should ensure that if there is some money leftover, even if it’s not a lot, that you put it in a rainy day fund. If you do this, then you will have some money on your side when the unexpected expenses hit, and this will be easier to recover from than if you had to borrow the entire amount. For example, you never plan to need something like a car accident lawyer, but there may come a time where you need one, and you need to be able to pay for this somehow.
You’ll Always Be Aware Of Your Financial Position
The final point that we’re going to be making today is that if you understand your finances, you will always be aware of your financial position. This sounds obvious, right? But, what we mean is that when you have awareness of a situation, you are more likely to do what it takes to keep yourself in the clear. If someone invites you out but you know your finances and know you don’t have any money available, then you will be able to politely decline rather than going out and spending money you don’t have.
Often, people think that they are in a different financial position than they actually are, and this is where a massive problem starts. You need to be aware of the money you have coming in, when it’s coming in, and when it’s going out again. If you don’t, this is where you find yourself in trouble.
As far as we can tell, there really are no downsides to understanding your finances, and ensuring that you are getting yourself on the right track. We do understand that it isn’t always easy to get your head around things in the beginning, but we promise you that if you stick with it, you will have no problem understanding your finances soon. The more that you do here, the easier your life is going to be in terms of finances, and seeing as this is where a large portion of stress for people comes from, we think that this is a great idea.
