This post comes to you from the NerdWallet.com team of financial bloggers and experts in helping users compare rewards credit card offers.
For a lot of people, managing finances isn’t a simple task, but even at its most basic level, personal finance is all about ensuring that you’re making more than what you’re spending, and that you’re saving enough money to hold you over after you have stopped working 40 hours a week.
Yes, it sounds easy, but there are a lot of things to calculate, like insurance, mortgages, car notes, credit cards, investments, and so on. Especially in light of the downturn of the economy, more people are beginning to seek personal financial help from advisors.
Even hiring help from the outside won’t make your personal finances a breeze, especially if you don’t truly comprehend what you’re getting into. Plus, it’s not cheap. [Kevin] There’s also the issue of conflict of interest depending on how they’re compensated, and what they’re compensated for. Before you decide to shell out money for someone else to do your finances, you should answer a few questions on your own about your financial habits, inclinations and what you can do to keep them in line.
Try Answering Your Own Questions
A lot of folks have questions that are hard to face, but if looked at in the right light, the answers are simple to find. In order to take control of your personal finances, you must first analyze your income and personal daily expenses. Your bank statements may look uninviting, but they are a great way to figure out your personal cash flow and how to maximize it.
You can also use free financial web sites like Mint.com and cheap ones like Quicken to help you get a better picture of your finances. You’ll be able to see transactions from your charge cards, which are recorded automatically. You’ll be able to read simple-to-read charts and graphs that show you how much you’re spending on shops and restaurants monthly. Without the proof right in front of us, we tend to underestimate how much we’re really spending. You can also opt to have your bills paid online, giving you more control of the money that’s coming in and out.
[Kevin] I personally use a mix of spreadsheets and the free software GnuCash. I agree that looking through the expenses helps one get an idea, and one also has to think about how they’re spending their cash, too.
Since credit cards issue monthly detailed statements, you can use them as a way to keep an eye on your spending habits. There are categories showing where your money is going inside of quarterly and semi-annually statements. For instance, at American Express, customers are offered online tools that help them to keep an eye on their spending habits and better control them.
You can even use this data to optimize the money you get back from cash back credit cards by understanding where you swipe most often. For instance, if you are using your credit card at restaurants, you can get a Costco Amex or Citi Forward as a main credit card, which will allow you to earn bonuses for your purchases. On the other hand, if you spend a lot of money on gas, you can get a gas credit card like PenFed Platinum Cashback, which offers 5% rebates.
In the end, knowing your spending habits can really pay off. It will also give you a better understanding of your personal spending and what unnecessary expenses can be eliminated. You’ll also be able to ensure that you’re receiving the best rebates and discounts for your necessary expenses.
One More Thing to Consider Before Hiring Financial Advisor
Finding out your spending habits is good, but isn’t always easy to fix. Making the necessary changes will require you to understand your own weaknesses and inclinations, and getting assistance when it is necessary.
You can purchase various types of financial help books that will help you with overcoming your own psychology, like I Will Teach You To Be Rich, by Ramit Sethi. Or you can use pseudo advisors like Dave Ramsey and Suze Orman. These types of gurus are well-known and respected because they have plans that have proven to help eliminate debt, control spending and saving money. You can also communicate with many others who are just like you, who will help to encourage you and share stories, which is what a financial advisor is paid to do. At least with this route, you are saving money and you’re in complete control.
This was a guest post by NerdWallet.com.
[Kevin] What are your thoughts on financial advisors? I don’t doubt that they may be trying to help, but the conflict of interest is always an issue. Even if the advisor is not on commission, a company is still trying to push certain products because they are more profitable. A couple years back, a friend of my girlfriend’s who recently found a job at an investment bank convinced her to invest a small bit of money into some back-ended mutual funds. Although she didn’t know about how these back-ended loads worked until later, I’m not sure that her friend even knew what she was selling or why it was an inferior product.