Let’s admit it, for most of us managing finances effectively is a tough task. I said most, and by this I meant – probably 90% of us, who do struggle to get finances in order. There are some bitter truth about personal finances that will come across as challenges. But, barring few wealthy people, most of us will struggle to keep up to those. Today let me tell you these bitter and tough facts about personal finance.
Your parents did their best to prepare you for the real world. Your schools taught you to tackle any situation. Unfortunately, their lessons in money management may have been slightly off. We were not taught to cope up with these financial bitter facts that’d surely come and bite us.
It’s important that you are aware of the bitter financial truths. As, only then you’ll be able to think and find a solution.
6 bitter and hard financial facts
Saving money is, at times, challenging
You probably have been told to save at least 10% of your income each month, no denying that you should try to do that. You possibly have done it many times. But can you do it consistently? Can you save 10% of every paycheck, every month?
It’s easier said than done. Unless you have some arrangements like automatic payment to your savings/investment account from your checking account, etc. Saving consistently is a tough job, in all practicality.
All of us have a wishlist. Over time this wish list becomes a never-ending list of wants. Hardly we find a need in such wish lists, they are full of things you can live without. One day the want-list becomes our goals. We spend our savings to fulfill those dreams, those wants.
So, try to train your mind to differentiate between wants and needs. Assess your current need and future need. Pay for the current need and save for the future. Only if something is still left, that can go in to fulfilling your want-list.
Budget doesn’t work, most of the time
This applies to you only if you do your personal budget.
I said it once before, personal budgets often fail. You should have taught all-along that to improve your finances all you need to do is create a budget. They didn’t tell you that almost every budget fails. They fail miserably. Be it your parents themselves, your neighbors or the federal govt. None of their budgets actually work.
There are very few who can stick to the budget, still they lack consistency. It’s impossible to stay within your budget every month, unless you’ve practiced discipline in your finances.
If your budget fails in the first month, or all the 12 months, do not despair. You still have so many more months to live. Fine tune your budget to meet the two things first – current need and future need. Have some provision for fun things. It’s very important to keep aside money for enjoyment. Otherwise the whole purpose is defeated.
Remember the fact, those who budget-lead happier retirement life and they don’t usually work past retirement age.
Bills only go up
No matter what you do, bills will go up over time. Your utility bills, credit card bills, property related bills, they never go down over time. Once you subscribe to a monthly payment plan based subscription it’ll never end.
Once you start your independent life, you’ll get hit with electricity, gas, internet, phone, etc bills. Over time you’ll add up other services, like TV, magazine, movies, the list will go on. The amount on this bill will go up over time. If you still have your 5 year-old bills handy, ]take them out and compare with your current bills.
How to deal with the situation?
Take stock of your every bill, think if you use the services you’re paying for. Cut down those that you don’t really use. You can also explore less pricier options.
You’ll never write financial goals
It’s not in our genes to write our financial goals. Lately, some financial bloggers started keeping their financial goals in writing. I hope they really follow their goals. I admit I don’t have my financial goals in mind.
All I do to improve my personal finances is setting aside money to max out retirement funds, I pay off all my bills in full every month and I have started paying off mortgage with any surplus money. Apart from these three I really don’t have anything written as such.
What I could have achieved with a written financial goal?
With a goal such us – paying off mortgage in 10 years, I’ll probably be more motivated to save and would try to find other ways to improve my income, by switching jobs or taking up additional jobs. Written goals work as constant motivators to excel in personal finance.
You love the idea of paying only the minimum credit card due
This is one of the most bitter truth about our weakness as a human being. Even if we can pay the entire balance, we don’t. Either we simply don’t pay the entire balance thinking the money be more useful in bank account (a mathematical mistake) or we don’t really afford to pay the entire balance (having more than you can chew).
It’s always more tempting to have the cash in hand to spend on other wishes. Try to be vigilant, find ways to pay off entire balance. You can either do this by cutting some spends or by avoiding unnecessary purchases. You can also save money by reducing waste and re-purpose things.
Do not buy things that you can’t pay off by the end of the month. If you can master this practice, you’ll soon be on a right track, my friend.
There will be at least one emergency money need in your life
Every person in the world will face a sudden money need, at some point of time in life. This is inevitable. Either a huge loss, a death, one illness, one accident, etc. whichever form it takes, it’ll be a test of your financial muscle.
Unless you have a safety net of an emergency fund you’ll find yourself in a debt trap. Build your emergency fund today and be ever prepared to meet the financial emergency. Ideally an emergency fund should be started as soon we you earn your first salary.
The whole purpose of writing this post was to make you aware of the impending financial dangers out there, and how vulnerable we are against those bitter hard truths. Unless you’re prepared to tackle each of them, you’ll not be able to manage your finances well, and ultimately you’ll struggle to strive financially.