financialtreat – will explain about tips for achieving success with good financial management that you will get in the following article. Let’s look at this article carefully!
Any income will never meet enough needs if you do not know about financial management. Rich people will also experience financial problems if they do not know how to manage personal finances properly.
In fact, financial management is the main key in achieving financial success. Especially with the increasing cost of living requires us to be smarter in managing finances so as not to get entangled in debt. If you are not married or have a family, let’s get used to it from now on to manage finances better so that needs can be met.
Want to know how to manage personal finance? Let’s take a look at the following review:
Manage Finances
We can manage personal finances by understanding two simple concepts, namely income and expenditure. Income is the amount of money you earn such as monthly salary, business income, investment income, pension, rent and so on. Meanwhile, expenditure is the payment of products or services with income.
Personal finance consists of a variety of topics, such as managing finances, personal financial records, and managing loans wisely. Understanding the basics of managing finances will keep you living well from today and building a stable financial future.
Do you make a record of your personal finances every month? If not, start recording your income this month so you can manage your personal finances well. This breakdown of income comes from salary as a company employee or civil servant.
You should also note if you get income from other professions or side businesses such as freelancers, online taxi drivers, online sales businesses, tutors, home rental businesses and so on. For example, as below:
- Salary as an employee: Rp3,000,000
- Wage as an online taxi driver : Rp5,000,000
- Kos rental business (5 rooms x RP500,000) : Rp2,500,000 +
- Total : Rp10.500.000
- Your income per month is IDR 10,500,000
Record Expenses
Once you have recorded the details of your income, then allocate your income to the spending budget. Divide your money into sections and allocate it to your spending plan, as below:
Alms
By charity, one will not fall poor and destitute. It is precisely the more charitable, the greater the potential for one’s sustenance will be abundant. Set aside at least 2.5% of your monthly income to give to orphans, poor people, refugees, victims of natural disasters, or people in need.
The more you share, the more you love. The Prophet said, “Bring down (bring) your sustenance (from Allah) by issuing alms”. (HR Al-Baihaqi). In one of the Hadiths of Qudsi, Allah says: “O son of Adam, infaklah (make your treasures), I will surely give you a living”. (Hr Muslim).
In addition, with a lot of almsgiving, Allah SWT will multiply your property from any direction, which was never expected. Allah SWT has promised the benefits of alms in Islam in accordance with His words in the Qur’an surah Saba’ which means:
“And whatever you make, Allah will replace it and He is the best giver of sustenance.” (Q.S. Saba verse 39).
Routine Needs
Every month, there are important needs that must be met regularly, such as buying kitchen needs, buying bath needs, paying for electricity and water, and so on. At least 50% of the monthly income should be set aside for these routine needs. However, this number can increase as needed.
The most efficient way is to record what is needed. The easy term is to make a budget plan. The needs in a month are recorded then calculated the price, how much the total is the budget for routine needs. Keep in mind, enter what really becomes a necessity. Avoid buying things because it’s just style or to fulfill prestige.
Savings
Savings is one of the important things that must be owned and prepared for everyone without exception. Because it can be used for various things such as buying a house, paying for unexpected needs, disasters and others. Income to be set aside for savings of at least 10%.
Insurance
In fact, insurance provides protection and guarantees your life and assets. The cost of the insurance policy you pay to the insurance company will be beneficial to your life and assets. When bad events happen, the family you leave behind no longer need to bother thinking about the bad events that befell you. Set aside at least 5% of your income for insurance premiums.
Investment
If God is willing to give you a long life, you can enjoy your financial success when you have an investment. Therefore, allocate 12.5% of your income to investments in various sectors, such as property, stock exchanges, P2P, forex, mutual funds, or others. Investment funds can also be used to get around the high cost of a child’s education or to prepare your retirement fund in the future.
Entertainment or Vacation Expenses
It is undeniable that stress can be experienced by everyone. If allowed to drag on, stress will turn into depression and even cause chronic diseases such as heart disease. Therefore, you need to prepare a special budget for entertainment or vacation to release stress. Raise about 10% for entertainment or this holiday. If the funds are not used, you can allocate it to savings or investments, because there are many entertainment places that do not cost as much as going to the beach.
Emergency Fund
Unexpected things can happen. Do not let unexpected expenses such as buying wedding gifts for family or friends, buying medicine, gratitude and so on make your financial plan fall apart. Therefore, you must set aside 10% of your income for this emergency.
However, if in a month you do not experience unexpected things or have to pay for these needs. You should save this emergency fund in savings for preparation in the future.
Managing Loans Wisely
Almost every resident in Indonesia has a loan, be it unsecured credit, employee loans, mortgage home ownership loans, car loans or business capital. Especially with the development of Indonesia’s economy, the government and private companies flocked to support and lend business capital to the community to pioneer or develop Micro, Small and Medium Enterprises (MSMEs).
For those of you who apply for a loan from a bank or loan provider company, you should know how to manage the loan wisely so as not to cause losses in the future:
1. Separating Personal Funds with Business Funds
The first thing you should do is commit to separating personal funds and business funds. With this step, you can control the income flow and expenditure of your business funds. Therefore, you must have two different savings accounts to separate the two funds.
2. Create a Report or Financial Management
Recording expenses and financial income in your pocket is one way to manage loans wisely. If you have a complete financial report or bookkeeping it will make it easier for you to see your gains or losses. Do not rule out the possibility, you can get a larger loan in the future if you have regular and regular reports or bookkeeping.
3. Utilizing Loan Funds for Work Productivity
Make the most of your loan funds, especially to increase work productivity, such as buying raw materials for products, buying work equipment, participating in job training and so on.
4. Able to Manage Cash Flow
To support the sustainability of a business, you must be able to manage cash flow. So, you have to monitor the flow of business cash turnover which includes the management of receivable debts and inventory of goods running well and there are no delays.
5. Allocation of Funds for Installment Payments
Make sure you allocate special funds to pay the loan installments every month. You must prepare yourself not to use these special funds for any needs. So, you can pay loan installments on time, so that your burden is reduced every month.
6. Avoid The Use of Loan Funds For Consumptive Needs
Avoiding the use of borrowed money for consumptive needs such as shopping, vacations, food, and other personal needs is the right action to manage the loan wisely.
What you should always instill in your mind is the initial goal to take out a loan just for the purpose of pioneering or business development.
Read more Financial Management:
7. Profit Investment for Business Development
The last thing you should do to manage a loan wisely in order to have good personal finances is to invest the profits you have earned to grow your business. You can set aside your business profits to buy new, more sophisticated equipment, improve the quality of your business products or services, and open a new branch of your business.
These are the steps that must be taken to manage your finances. Start managing your finances from now on in order to be financially successful in the future. Good luck!