Consumer risk management, the management of personal finances, is much more straightforward than it appears. You just have to find a way to routinely spend less than you make. However, such things are more easily said than done. For many people a strategy is required.
1. STOP BUYING THINGS YOU DO NOT NEED: In looking for a smarter way to handle your personal consumer risk management, start by looking at the basics – namely, you, and your spending patterns. In order to start managing your finances effectively, you have to stop buying things you don’t really need. Try to think of every purchase as either an investment or a sustenance – an investment, such as a suit for interviews, earns marked returns and sustenance (e.g. groceries, utilities) are required for survival. Begin managing your finances by eliminating those purchases that fall outside those parameters.
2. INVEST IN THE THINGS YOU DO NEED: Next, be sure that you are investing in the things you do need. For instance, if you use a lot of sugar, buy the large bag and you will save money in the long run. Likewise, if you buy a suit or coat, buy a nice one in a modern cut; with proper care it may last for ten years (or longer). By buying quality, you will save money on replacement costs.
3. BUILD CAPITAL: Similarly, you need to build the capital to be able to buy better quality or larger volume items. When you have adequate capital, you can afford to buy the larger volume item, buy more of an item on a good sale (e.g. Your favorite coffee is half price) or buy the more expensive (and presumably better quality) suit. In addition, when you have a healthy bank account, you can spend less time monitoring your finances. For example, if you have more than one month’s income saved in your checking account, you would not even have to balance your checkbook but once a month (unless you had an unusual expense).
4. ONLY BORROW TO INVEST: You should also be careful about the debt you take on. Ideally, you should only take on debt if you can earn a return on the sum later, such as buying a house and selling it for more than its initial value. However, this would not be true with say a car as vehicles depreciate the moment they are bought.
5. LEARN TO DO IT YOURSELF: Lastly, consider managing your finances better by learning to do more things yourself. Not only can you gain a sense of accomplishment, but you can also save a fair sum of money by learning how to make small clothing repairs (e.g. torn hem, replace a button), minor home repairs (e.g. change the light bulb in the stove vent hood, paint the walls), cook (eating at home is much less expensive than eating out), and general craft skills (e.g. refinish a table).
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