The job of managing your personal finances can be time-consuming. You need to have some basic knowledge about finances, and review your situation periodically. If you make poor financial decisions, it can take years to recover from your mistakes. Use these tips from successful corporations to manage your finances.

Creating a cash reserve

Ideally, everyone should create a monthly budget. That budget should include a line item for savings. Everyone needs a cash reserve. The extra cash you accumulate can help you cover an unexpected expense.

Mohawk is an example of a company that maintains a good cash reserve. In business, the cash reserve can cover an expense or be used to take advantage of an opportunity.

When you create a budget, you can use whatever system works for you. It’s critical, however, that you put budget in writing. If you can look at a piece of paper or on a computer screen and see your budget, chances are you’ll make the effort to stick with it.

Create categories for each type of spending. You should label each spending category as either fixed or variable. Say, for example, that your monthly income is $4,000 after tax. You have fixed expenses (home loan, car payments) of $3,000 and variable costs (food, gas, entertainment) of $1,000.

Assume you want to save $150 per month. If you need to cut expenses to generate savings, review your variable expenses first. Maybe you can cut down on dining out and come up with the $150.

Diversify your investments

When your savings balance gets large enough, you may consider investing some of those dollars. When people consider investments, they normally think of stock and bonds.

Hamad Darwish Al Masah Capital explains that investors can now consider alternative investments. Alternative investments include real estate, commodities and other less traditional securities.

The important point is to diversify your holdings. If you diversify, you won’t be hugely affected by any single change in the investment markets.

Maintaining good credit

If you have a good credit rating, manage your borrowing so you keep that high rating. Make sure that you can afford the monthly principal and interest payments on any debt you incur. Ensure that your payments are on time, and that your credit report is accurate.

A high credit rating also provides advantages to a corporation. Standard and Poor’s (S&P) rates the creditworthiness of businesses. The highest S&P rating is AAA.  USA Today reports that only three US companies had a AAA credit rating in 2014.

Both individuals and companies with a high credit rating can borrow at lower interest rates. This reduces the cost of borrowing and makes loan repayment easier.

Borrowing alternatives

Sometimes, a business cannot borrow through a traditional bank. The interest rate on the bank loan may be much higher than the company wants to pay. Hamad Darwish of Al Masah Capital points out that investment firms can help companies raise capital through a loan or buy issuing stock.

Individuals also have choices if they cannot get a loan from a bank or credit union. Borrowers can find a company that specializes in loans to people with poor credit. You can get the financing you need, if you’ll willing to pay a higher interest rate.

Use these tips to monitor your personal finances. If you’re willing to invest some time and effort, you can improve your financial situation.

This entry was posted on Monday, July 20th, 2015 at 6:34 pm and is filed under Financial planning, Personal Finance. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.