HOW TO MANAGE YOUR FINANCES. ( 7 KEYS FOR CHRISTIAN MILLENNIALS).

Estimated reading time: 10 minutes

It can be daunting managing your personal finances. It can especially be even more difficult when you don’t have the tools to help you do that. And today I wanted to provide you with the 7 keys that will help you manage your finances. You don’t even need to have a finance degree to do these 7 things. So buckle up and let’s get right into it.

7 keys to help you manage your finances.
5 mistakes you should avoid when managing your finances.
Conclusion

Some goals will take years — if not decades — to reach. That’s part of the plan! But you also get an immediate payoff: a whole lot less stress starting the minute you dive into taking control of all the money stuff that’s gnawing at you.

According to a 2019 survey, 9 in 10 adults say nothing makes them happier or more confident than having their finances in order.

7 keys to help you manage your finances.

Understand your current position

It is important to know where you are at as this will help you determine where you are going. What is your current financial health? What are your assets and liabilities? Do you know your income and expenses? This is always the first place to start as this will help you create an effective plan that will help you learn how to better manage your finances. You can do this by listing them all down and categorizing them all as either an asset, liability, expense, or income. If you don’t know the difference, check out my blog post on personal finances.

The goal of this exercise is to give you an overall view of your current financial position so that you can know what you need to do next which is to create a budget. We will look at it at a later point.

Set short-term and long-term goals.

Now that you know your current financial health, you can then write your financial goals. What do you want to achieve? What are your plans for the future? We can categorize these goals into two: short-term and long-term. Short-term goals often can be achieved within a year, while long-term goals can be anywhere between 2 and 10+ years.

Examples of short-term goals include:

Paying off debt.
Cutting down on expenses.
Saving for your home down-payment
creating an emergency fund
Starting a side hustle
Managing your household expenses.
Paying for an online course.
Going for counseling, etc.

Examples of long-term goals include:

Long-term investments like in hedge funds, mutual funds, stocks, and index funds
Life insurance
Saving and planning for retirement.
Paying off student loans.
Making large purchases like a home or investment property
Saving for your child’s college fund.

The key difference between a short-term and long-term goal is the period it takes to actualize the goal. If you take longer than 3 years then you can consider it a long-term financial goal. What other financial goals come to mind? And where would you categorize them?

Remember to prioritize your financial goals depending on the importance and your disposable income.

Set a budget and stick to it as a way to manage your finances.

Now that you know your income and expenses and you also know your financial goals, it is time to plan on how you are going to factor them in. This is where creating a budget comes in. You see, you can only plan for something when you have a plan. And it is important that you know how you can organize your finances to make room for the goals that you have set.

There are tools out there that can help you create a budget plan that is specific to your needs. A simple budget will look like you have all your sources of income on one side and your expenses on the other side. Doing this will help you know how much you save after settling all your obligations. With the amount of money you are left with you can then plan how much you will set aside for your financial goals.

The more realistic you are as you set your budget, the more likely you will be to stick to it. Also as you set your budget, evaluate your expenses and ask yourself these questions so as to know what you can cut back on.

Do I want it?
Can I afford it?
Do I need it?
Will it affect my lifestyle if I decide to stop paying for the service?

If you answer more no than yes, then you probably don’t need it anyway.

Create an emergency fund.

Unless you have money stashed away, you are one paycheck away from going bankrupt. And to avoid this from happening, the best thing you should do is to have an emergency fund. The goal for having one is to ensure that in the event of some unavoidable situation such as sickness or job loss, you have some money to sustain you as you get back up on your feet. The goal is to have at least 5 months of your monthly expenses saved. This will give you the peace of mind to know that when push comes to shove, you can at least take care of yourself for 4 or so months as you get back on your feet.

You should also ensure that your emergency fund is separate from your savings fund. Remember under no circumstance should you touch these funds unless you are in a crisis. I hope you now see why having a budget is important. You can easily know what to cut back on so that you can save for your emergency fund.

Save for retirement

For example; how much can you put out when it comes to saving for your retirement? How much do you want to save up by the time you retire? What are your obligations and what is your source of income? Can you cut back on expenses and increase your income? How can you do that? How old are you? For how long do you need to invest to achieve your financial goal? When setting a budget, it is important that you ask yourselves these questions:

Remember, your goal is for you to achieve your financial goals, so you need to be realistic and honest with yourself. And to help you illustrate this, let us look at an example.

You start investing in the market at $100 a month, averaging a positive return of 1% a month (which is 12% a year), compounded monthly over 40 years. Your friend, who is the same age, doesn’t begin investing until 30 years later and invests $1,000 a month for 10 years, also averaging 1% a month (12% a year), compounded monthly. After 10 years, your friend will have saved around $230,000. Your retirement account will be a bit over $1.17 million. investor.com

You see the power of the compounding effect. So don’t wait until you are older. The sooner you start saving for retirement, the easier it will be for you in the future.

Investing in financial education will help you manage your finances.

Knowledge is power. And the secret to success is gaining knowledge from experts in the field you are struggling in. Whether that looks like you buying finance books or investing in courses on personal finance, you should not hesitate on doing that. It is very easy to get misled especially in this era where everyone is entitled to their opinion and everyone has something to say. Find information on the topic as this will help you make wise decisions. Remember, even the Bible clearly tells us that people perish for lack of knowledge. And there is no excuse for ignorance.

You can start by investing your time. There are a ton of free courses on Alison that teach personal finance. There are also courses on YouTube that do the same. Find videos and courses that speak in the areas you are struggling in. Whether it is saving for retirement or budgeting, you will always find information if you look for it. Remember, every master was once a student. And now is the best time to start with financial knowledge.

Find an accountability partner

Managing your finances is a lifelong journey. And it is important that you have someone to keep you accountable. Whether that looks like your spouse, sibling, or friend as your initial accountability partner, then do it. The goal of having an accountability partner is to help keep you on track when you lose your way and motivate you to keep going when you want to quit. Alternatively, you can hire a financial advisor or a financial coach to help keep you accountable and ensure that you meet your financial goal. There is no use in setting goals if you don’t achieve them

5 mistakes you should avoid when managing your finances.

Not having a budget- When you don’t have a budget, you will not know your net-worth and this will oftentimes lead you to overspend or spend on unnecessary things while forgoing the important things. A budget will; help keep you in check. If you want to be successful at managing your finances, you need to be intentional about your finances and the best way to do that is by creating a budget and sticking to it.
Not saving for retirement- The reality is that we will all grow old. And if we ignore that fact now we will work for money until our last breath. The goal is to get to the point where in your later years, you can take care of yourself and not have to depend on your children.
Not investing in yourself. Not gaining financial knowledge will only lead you to pitfalls and even sometimes scams. There is no use in you losing your hard-earned money on scammers. Therefore, the best thing you can do is to gain financial knowledge. Upskilling is also another way of investing in yourself to ensure that your skills don’t become redundant. In what ways can you complement your current skills?
Ignoring income-generating opportunities- Money is what money does. And of the best uses of money is to have money work for you through investments. You don’t have to start big. The goal is to ensure that your savings grow in such a way that inflation is factored in. In this case, you will need a financial advisor to advise you on different investment opportunities and the right one for you based on your disposable income, your age, and your risk appetite. Other ways of generating income could look like you getting another job or starting a side hustle. The point is to make hay while the sun shines.
Making major purchases without comparing the prices- It is okay to always go for the best deal that ensures more money in your pocket. Whether it is a house or a car, ensure that you compare the prices so that you don’t end up paying more for something you could have bought cheaply.. In the case of a home purchase, what is the lowest interest you can pay? Can you get a cheaper home that has the same quality as the one you desire right now? Do the same for a car as well. Even with services like life insurance, always ensure that you go for the best deal.
Lack of awareness when it comes to inflation and recession, then leads you to make financial decisions that can harm you in the future. Not knowing where to invest in the event of a recession and inflation can lead you to pay heavily in the future.

Conclusion

(Proverbs 13:16)

“A wise man thinks ahead; a fool doesn’t, and even brags about it!”

(Proverbs 21:5)

“The plans of the diligent lead to profit as surely as haste leads to poverty.”

(Luke 14:28)

“Suppose one of you wants to build a tower. Won’t you first sit down and estimate the cost to see if you have enough money to complete it?

(Proverbs 30:24-25)

“Four things on earth are small, yet they are extremely wise: Ants are creatures of little strength, yet they store up their food in the summer;”

Managing your finances is one of the best ways to ensure that you leave your grandchildren an inheritance. Remember the Bible tells us that that is what wise people do. So let me encourage you to be prudent with your finances and be like the wise people who store up their choice foods and olive oil for later. When you take care of your finances today, your finances will take care of you tomorrow.

One last tip that will help you as a Christian is to always remember the tithing, sowing, giving, and first fruit laws. They will help you to successfully manage your finances. To learn more about this, check out my blog on the Biblical financial truths you need to know. If God doesn’t give you wisdom, you will not manage your finances well.

HOW TO MANAGE YOUR FINANCES. ( 7 KEYS FOR CHRISTIAN MILLENNIALS).