personal finances

Most people don't know how to properly administer their money. This is not something that is taught in school, so most citizens learn along the way however, they can.

If you feel hopeless when administering your incomes, there are some strategies you can learn to manage your money correctly. Specially around this time of the year, at the beginning of the holiday shopping season, with all the Black Friday and Cyber Monday specials tempting us to shop constantly without really considering our finances.

Learning to manage your money adequately takes time. You need to understand your financial situation and to improve yourself takes commitment and will.
Let us take a look at the proper steps for better managing your money.

Set a budget

If you never created a budget you better get to it. This is extremely necessary.
At first, it may seem hard to achieve, but you can make it happen and it will help you see with clarity your financial situation, and this is the key to taking control of your finances.
A budget is the first step for balance in your financial life; it will give you peace of mind. It will help you to pay off debt and to start saving for eventual expenses. To create a budget you need to know your income and your expenses.

Know your expenses

Most people are unable to tell, off the top of their head, how much they spend a month for living. This is not strange; many people don't know the amount of expenses they have to pay per month. The solution to this problem is simple; you have to keep track of all your expenses for a month. Save all the receipts (supermarket, groceries, restaurant, Cyber Monday specials, etc.) and add up all your fixed expenses. You must keep track of what you paid with cash as well as credit cards. This way you will get all your expenses (fixed and variable) detailed and summed up, to get a total amount. This exercise will allow you to know how much money you need to pay for your expenses every month, this way you will be able to see the whole picture. After some period of time, you will be able to compare your historical performance.

Understand the dynamic between income and expenses

Unlike what happens with expenses, everyone knows, off the top of their head, how much money they earn a month. As you can see, most people know the amount of their income per month, but don´t register how much their expenses are per month.
What you need to do, once you figured out the total amount for expenses, is subtract that from your monthly income. If your result is a negative number it means you spend more than you earn, in such case you should reduce your expenses until the result is zero. If your result is a positive number it means you spend less than you earn, in such case you are able to increase your savings or debt payments.

Pay off debt

Most people need help getting out of debt. First, it is imperative to get it under control and try to liquidate it. If you own a debt look to consolidate them, try to reach an agreement to get the lowest interest rate. It is important to assign whatever money you can to pay your debts, try to cut out or, at least, reduce some expenses, remove completely the unnecessary ones. Stop generating more debt by using your credit cards, stick to your budget. Keep paying, at least the minimum, until your debt is paid off.

If you can, create an emergency fund

If you have the chance you should allocate a portion of your income to an emergency fund. Anything can happen and such a fund allows you to be prepared. It is important to create a fund to have good financial management. 

If you can achieve an emergency fund, you shouldn't take money out of it, unless it is really an emergency, like losing your job or an unexpected and unfortunate expense. Otherwise, you should leave the money still earning interest.