Financial independence feels exhilarating, but things can quickly come crashing down if you’re not smart about managing your finances. As we come closer to spring this year, let’s make a conscious effort to declutter your finances for a brighter and happier bank balance. In this article, we will discuss 4 simple ways in which you can clean up your personal finances this season.
But before we get into the ‘how’ of managing finances, let’s look at ‘why’ it’s important in the first place.
Why managing money is important
Money management is a crucial part of your financial life. It allows you to budget, spend, and save to achieve your financial goals, remove debt from your life, and build your savings for a secure future. Here are a few reasons good personal finance management is essential.
To understand your income streams
Everyone has money coming in from somewhere, but it is vital to understand your income streams from an analytical point of view. When you are financially literate, you can take charge of your income instead of allowing your money to take over your decisions.
Understanding your financial situation is critical to finding out whether your sources of income can sustain your current lifestyle. It can also help you explore sound investments to make your money grow.
To establish clear financial goals
When you are able to organize your spending and savings, you get to know where your money is going. It allows you to check whether your current and future financial situation is aligned with your goals. Furthermore, understanding your spending patterns enables you to assess whether your financial goals are realistic and achievable.
To feel motivated to earn more
When you realize that your earnings do not match your future financial goals, you feel encouraged to double up your efforts and explore new sources of income. It may include taking up a new job, starting a business, changing your career path, or investing in financial instruments. Ultimately, financial management awakens your desire to make more money to achieve the milestones you set out for yourself initially.
How to spring clean your finances in 4 easy ways!
Everyone wants financial freedom, but only a few have the knowledge required to achieve it. Some believe that a higher-paying job is a solution to all their financial woes, but in truth, the highest-paid employees can be deeply buried in debt. The primary reason so many people struggle with debt is their inadequacy in managing their personal finances.
Here are a few practical tips for spring-cleaning your finances and turning over a new leaf.
- Remove unused subscriptions
As subscriptions for streaming services are gaining popularity, the subscription economy is set to be one of the world’s fastest-growing industries by 2025. The main reason behind this growth rate is regular people like yourself who forget to ‘unsubscribe’ or ‘cancel’ their subscriptions after they no longer have any use for them.
Did you know that many subscriptions auto-renew regularly, which means you waste your hard-earned money on products and services you don’t even use. What you need is a subscription detox! A simple exercise that helps you get rid of subscriptions that don’t give you any benefits and, in turn, identify the ones you truly need.
There are two ways to go about a subscription detox. The first one is to eliminate all your subscriptions and then add back what you really want to keep. The second approach is less radical and more gradual. Here, you can carefully analyze all the subscriptions you currently have and remove the ones that no longer appeal to you.
Remember, a $15 monthly subscription might not seem like much at first, but it slowly builds into $180 in your bank account at the end of the year. So, be careful of what you add back or keep in your subscription list.
- Review existing credit cards
Credit cards are excellent for buying things you want without worrying about their actual cost. However, if you have multiple credit cards, each with a different spending limit, interest rate, and so on, it can get confusing to keep track of the details.
If you’re guilty of ignoring your monthly credit card statements, now is a good time to hop onto each card issuer’s website to download your latest statement. This will help you view and categorize your expenses and understand how much you are actually spending. For example, you can split your purchases into utilities, subscriptions, dining, grocery, medical, and entertainment to see how much you’re spending where.
Once you have the total for each category, divide it by 12 to see your monthly average. This way, you can find out how much each credit card account is costing you and whether your spending pattern positively or negatively affects your finances.
You should check your credit cards in Malaysia for the following:
- The interest rate you’re paying for purchases compared with the average APR currently being offered.
- Your debt ratio.
- The annual fees and late payment fees that are being deducted from your account.
- The credit limit of each credit card to ensure that your balance is below 30% of the amount.
- Any rewards in terms of cash, miles, or points you’ve earned during the billing period.
- If you’re late with payments and the earliest you should pay to avoid any late fees.
- Prioritize your debts
Debts are unavoidable in the current financial scenario but carrying multiple debts simultaneously can be overwhelming and result in bad debts. Many people need help figuring out where to focus their repayments efforts first. Regardless of which debt you pay off first, keeping your other debts open means compounding the problem gradually with interest. So, which debts should you knock off first?
One method is to prioritize repayment of the highest-interest-plan first. Since debts with a higher interest rate ultimately cost you more in the long run, it only makes sense to check them off your list quickly. To follow this debt repayment plan, you need to list down all your debts by interest rate from highest to lowest.
While you must pay the minimum amount owed on each of them, you can focus more effort on paying debts with a higher interest rate. Keep checking off the debts on your list to gain better control of your finances.
Another method is the debt snowball plan which targets the smallest balance first. With this technique, any extra money you can spare is used to clear the smallest debt on your list. Once the first one is paid off, you take the amount you were paying every month and dedicate it to clearing the next smallest balance.
Hence, as you continue to get rid of debt, you create a similar effect to a snowball rolling downhill.
- Automate your savings
Automating your savings isn’t a new concept but one that has been proven time and again to be an excellent way of managing your personal finances. There are several reasons why automating their savings works for most people.
As humans, we gravitate more toward instant gratification. Hence, if we are faced with a situation where we can choose between splurging on a sale or investing the money, we are likely to make a choice that benefits us instantly. Thus, automating your savings protects you from the present bias.
When you set yourself up for automated savings, you take the choice to spend the amount away from your reach. This is how your savings can grow without you even thinking about it.
A simple way to achieve this is by updating your paycheck deposit so that a certain amount directly goes into your savings account. When that amount does not enter your checking account, the chances of you spending it will reduce significantly.
Another way to do this is by setting up automatic deposits from your checking account into your savings account. You can plan the deposits to occur on the same day each month. For example, one day after your paycheck is credited to your checking account.
Atome- An effective way to manage your budget
The smartest way to manage your finances is to minimize your purchases. Unfortunately, that’s easier said than done since several purchases are unavoidable. Hence, you need another solution where you can buy the things you want without messing with your monthly budget.
Enter, Atome- the perfect answer to your shopping dilemma!
Atome is a BNPL company based in Singapore but operates in ten locations, including Malaysia. It has more than 15,000 partner merchants, which means as an Atome user, you have thousands of choices in terms of high-quality products and premium services.
What makes Atome an excellent payment service is that it allows users to divide their bill at any partner merchant’s store into three parts. The first part is paid at the time of purchase, while the other two are deferred to the following months.
This way, you can own the things you desire without having to pay for them in full. While the same can be achieved with a credit card, they usually have high-interest rates that increase your debt over time. Atome is different because when you pay using its service, you don’t have to pay any interest charges on the monthly payments. In addition, the platform doesn’t charge any service fee, which means no sudden surprises in the form of deductions at the end of the year.
If Atome sounds like the shopping partner you were looking for, download its app (Get Atome’s app) and set up an account. Once the system checks your payment details, you can shop at any partner merchant store you want.
How to pay with Atome
- Scan the QR code from Atome’s app for in-store purchases.
- For online shopping, choose Atome as your payment partner at checkout.
- Enter your user details and continue.
- Pay one part of your total bill and defer the remaining amount.
Discover a new way to manage your finances with Atome
BNPL companies are growing increasingly popular among Millennials and Gen Z. A major reason is the convenience shoppers can experience with flexible payment options. In addition to monthly payments, users can stick to their monthly budget without extra effort. So, if you want to take a conscious step towards better managing your personal finances, partner with Atome whenever you want to shop.