Managing money is more important and critical than earning and spending money. If you are unable to manage your own money then it will be of no use even if you are earning millions of dollars in a year. One should select the right path and approach in how to manage money. In fact, this is the most significant part and phase in your life.
A person who knows how to manage his hard-earned money will always be successful. No matter, how much he or she earns! I have seen people who are just earning few dollars in a month, but they have a huge savings because they have managed their money in a very clever way. These are no special skills which everyone is born with, these are some qualities which one should follow and implement in their actual life.
In this blog, we will see some of the factors which can helps us in managing our own money. As I have stated earlier, everyone can follow these qualities and implement it in their real life. Why do you think all Millionaires and Billionaires across the world are successful? The answer is, they know when and how to manage their money and also Where to invest and where not to invest?
Nothing is free in this world, if you are taking money as a credit from someone, bank or any company then you have to repay it with a high interest rate. Try not to take any money as a credit from someone, especially avoid credit cards. If you are unable to pay the extra interest amount, you may fall in a debt and the debt can pile up. This can also hamper your credit score and in future you can be blacklisted.
Once you are blacklisted, none of the financial institutions and banks will give you credit money in future.
Invest in long term
Invest in Mutual funds, real estate, stocks, etc. Normally long term investment can give you some good returns, Move out from short term investment, these investments are not profitable. The results of long term investment will be seen after few years, so you need to have some patience and wait for few years. All successful entrepreneurs, industrialists and capitalist go for long term investment, this is one of the sensible way of managing your money.
Create your financial goals
The best way to manage your money is to set some financial goals every year. Set a goal that you will purchase a brand new car next year, start depositing money for this particular goal. This will definitely help you in saving money on a daily or monthly basis. In the same way, create multiple financial goals, like you have to purchase an apartment, or you have to go to a world tour with your family.
Unless and until your goals are set, you will not show any interest in saving money.
Take an early retirement
Normally people retire at an age of 60, you should plan your financial life in such a way that you retire at an early age. So, what will I do after I am 50 years old? What will be my source of earning? and How will I live without any money?
By the time you are in your thirty’s and forty’s, you should start your passive income. An income which will run till you are alive. Passive income can be from Affiliate marketing, Blogging, Online marketing, etc. Setup your passive income before you reach 50, and don’t be dependent on a single source of passive income. Create multiple streams of passive income.
Click here to find out more on Passive Income.
Start your emergency fund
Make a habit of saving few dollars every month from your salary or source of income, save this amount in a separate account, this can be your emergency fund. Emergencies can come up in a form of a medical, financial, etc. This fund will play an important role during such emergencies.
I would suggest to save at least 10% of the monthly income in emergencies funds. For example, if your earnings are 3k dollars in a month. You should save $300 every month in emergency fund.
Avoid Daily Expenses
Reduce daily expenses, try to minimize the daily spends. Spend only if it is critical and mandatory. If possible stop the recurring expenses. List down a complete list of daily expenses, mark which are essentials and non-essentials.
Track your spending and investments
Keep a track of your daily, weekly and monthly spending. Use any money management free app to track your spending. Check if the spending are on non-essential items or products. Like the same way, track your investments.
Please ensure that the investment amount is bigger than the spending amount.
What are the 5 principles of money management?
The five principles are consistency, timeliness, justification, documentation, and certification.
What is it important to manage your money?
When you start managing your finances, you’ll have a better perspective of where and how you’re spending your money. This can help you keep within your budget, and even increase your savings. With good personal finance management, you’ll also learn to control your money so you can achieve your financial goals.
What are the 3 rules of money?
- The Law of 10 Cents. When you keep this law, you take 10 cents of every dollar you earn or receive and HIDE IT.
- The Law of Organization. Quick: How much money is in your share draft account right now?
- The Law of Enjoying the Wait. It’s widely accepted that good things come to those who wait.
How do I budget monthly?
- Calculate your monthly income, pick a budgeting method and monitor your progress.
- Try the 50/30/20 rule as a simple budgeting framework.
- Allow up to 50% of your income for needs.
- Leave 30% of your income for wants.
- Commit 20% of your income to savings and debt repayment.