Bad money management can shatter all your expectations. But you do not want that. This article on how to manage money wisely is based on the results of a long study by me.
The simpler your money management policy, the easier it will be for you to maintain it. If it gets complicated you will be lazy to maintain it.
However, many people do not manage their money properly. This article aims to provide you with great strategies that we have tried and implemented that will help you learn How to Manage Money Wisely. In this article, we provide you with 10 steps to manage wealth with a bonus tip.
Table of Contents
Importance of Managing Money
Having a good money management plan can be a light for those who are struggling to get your financial life in order and for personal aspirations.
This article will be useful for you if you have bank accounts, credit cards, which are often difficult to grasp and fully understand your personal financial situation.
If your financial situation is very easy and good, you will feel that life is very easy. You cannot learn to manage your wealth at once.
Like everything else, it takes time to master. But it’s not so easy if you miss the little things.
Because even a large building is made up of small bricks. Everyone and anyone who controlled their money went through this. It is important to get your financial life in order as soon as possible.
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How Do You Manage Your Money Wisely?
01.Set your financial goals
Data Gathering
The first step in building wealth is setting goals that you want to achieve. You need the information to set goals. Then, the first step is to gather financial information about you. By doing so, we hope to understand your current financial situation.
The bank loans you have obtained, the credit cards, the total amount of assets you have at present and the financial valuation, etc. are useful for this, and you should have an understanding of that.
Identify Your Needs
A goal is the first step in guiding you to the right path. You definitely need to know what is most important to you before setting goals. If so, what you need to do in this step is to identify what you really need.
Line up your financial goals one by one in order of importance. They are easy to reach by you writing it down.
But financial goals should be achievable. And you have to work for it. The other thing is that some of those goals are measurable in money. An example might be buying a new home.
Create a Schedule to Reach those Needs with Time Frame
Setting goals is not enough to achieve them. There should be a time limit for that. Or they will just be dreams. Set a deadline for all your goals.
Categorizing your goals as short-term, medium-term, and long-term financial goals is a reason to get your plan achieved quickly. It also helps to match your goals with the right resources.
You can even enlist the help of a financial professional to guide you through investment decisions.
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02. Well Known about Your Expenses
How to calculate monthly income and expenses
Accounting is probably the most troublesome subject in the world. It can also confuse many people. It is also the most important subject for you if you want to become rich on a long term basis.
Revenue and expenditure are one of the two elements here. So I hope you understand how important your budget management is.
There is no standard method or tool for budgeting. It can be customized by individuals in their own way.
Whichever approach you choose, you need to make sure that you create a clear and accurate picture of your finances and wealth. It should also be possible to simply look at that approach.
The first thing you need to do here is making a list of all your monthly expenses. When listing expenses it is easy to identify them as fixed or variable expenses.
By listing and categorizing expenses, you can gain a better understanding of what significant portions of your income are being consumed for.
List and categorize all monthly income and expenses
As I mentioned to you earlier, in order to set your budget to meet specific goals, you must first find out which costs are fixed and variable.
Fixed expenses are expenses that need to be kept unchanged and they are definitely something you have to pay monthly. For example, rent, wages, and insurance are specific payments to you.
Other costs are variable costs. for example, cell phone expenses, education, eating out, health expenses, house utilities, groceries, helping others, entertainments, etc.
These do not need to be kept unchanged and may increase or decrease from month to month.
Use 50/30/20 rule
Maintaining a budget alone is not enough to calculate revenue and expenditure. The purpose of keeping a budget is to set financial goals. But if not you will not get the results you expected. Here you must choose the right budget approach.
The 50-30-20 format is a financial initiative pioneered by US Senator Elizabeth Warren in D-Massachusetts.
The simpler something is, the easier it is to implement and understand. You will find that this approach is so popular because of its simplicity.
I mentioned the bucket money management policy in a previous article. The same thing happens with this approach; divide your income into 3 bins, that is, 50% for one, 30% for the other, and 20% for the rest. 50% refers to food and rent, credit cards, and other loans; 30% for “needs” such as travel or entertainment; the remaining 20% is for savings. This may include repaying the loan.
I mentioned in an earlier article that you should maintain a confidential account and never withdraw money from that account. That account is the account that pays you back if you lose your business or job.
The 20% savings in this approach should also include an emergency fund that can cover three months’ expenses. Such an emergency fund needs for maintaining in the event of a loss of income until it is recovered.
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03. Create a Budget
Trying to manage your money without a budget is like looking for a way out of the dark. He does not know where he is going.
The best way to find out where you are financially is to create a budget. Earlier I explained to you about the basic need to prepare a budget.
Accordingly, learning how to create a monthly budget is an essential step to gaining complete control over your finances.
A budget can help you succeed, pay off debt, protect your debt, save effectively, and achieve your financial goals.
As a first step in preparing a budget, you should find a way to record your budget. This means writing on a piece of paper, choosing to use an Excel or budget application. Whichever method you choose, it should be easy for you.
The budget you prepare should consist of two categories. One is to include your projected income by categories as the amount you estimate and the actual amount.
The purpose of such categorization is to allow you to include your planned income, look for changes, and adapt to any fluctuations or irregular spending.
Since your monthly income should be the most important thing you see in your budget, this is the number that really determines what you have to spend.
Then list your monthly expenses in line with income. Subtract all your monthly expenses from your monthly income.
Most household bills are not always fixed when budgeting, so be careful when making adjustments. To get on the road and get through your money, be sure to work with your budget.
If you need a simple budget template please do not hesitate to comment below, I will provide them as always.
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04. Be Aware When Borrowing
Borrowing is the ability to receive money based on the assumption that you will use some of the money you receive to pay it back.
Many people in the world take out loans, not for investment but consumption. They spend that money on housing, cars, and everyday expenses.
Some even take out loans to start a new business, make a variety of investments, take a course, or pursue an education. That is, you are tempted to borrow money when you need it most. Whatever the type of loan, the risk depends on the size of the loan.
What to consider when borrowing money?
Whether you are borrowing money to spend on something unexpected (like an illness) or something else, there are a few things you need to know in advance.
The intelligent person chooses something by comparison. When you borrow money, you have to repay the principal. And in almost every case you have to pay more than you took.
What happens here is that you have to make a payment to the institution that took the loan and that is the interest.
Credit interest varies from institution to institution and is updated over time. As rates change regularly, you need to find a lucrative borrowing market. Choose the one that offers the lowest interest rates by comparison when you take out a loan.
My recommendation is that it is better to use your savings than to go into debt. This is to maintain a secret account in case of an emergency. If you are looking to get a loan from a friend or family, there are other opportunities.
That means you can get a lower rate with this method. But it is important to have clear rules and written agreement around any money transfer.
However, in my opinion, if you get a loan, that money should be directed to some investment and the money should be re-created. Without it, getting a loan for consumption would not be such a wise move.
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05. Select Suitable Investments
Investing is easy. But it is not so easy to operate successfully. You need to have a clear understanding of the requirements and requirements that you are preparing to get by investing.
Getting to know yourself, your needs, and your appetite for goals and risks is a good start.
Investing is a basic and essential foundation for wealth growth. What you can expect from it is how quickly you can get your money back.
And you should definitely consider the timeline here. If you are looking to invest in stocks or funds and buy land, it is not the right decision because their value goes up or down.
Other investments, instead of long-term savings accounts offer a better chance of reducing inflation and reaching your retirement goal.
The first thing you need to do is get a clear idea of your investment opportunities and objectives. Then make a formal plan to assess how much risk you can take.
My recommendation is to start the first investment with something less risky. Then you can go for a medium risk like unit trust.
However, consider high-risk investments only if you are willing and willing to accept the risk of losing the money you put into them.
Diversification is a basic rule of investing. It is a fact that the greater the risk, the greater the benefits. So you have to accept more risk to improve your chances of getting a benefit.
The balance between risk and return can be managed and improved by not moving money in the same direction across different types of investments and sectors.
Investment Advisors
Finally, make sure you understand the risks involved in investing. But if you have doubts about the types of investments you want or which investment to choose, it is important to seek financial advice. Here you will find the right financial advisor for you.
If you are buying investments like stocks, you will definitely want to use a stock brokerage service. It also has to pay transaction fees.
Whether you look at investment funds, stockbrokers, or financial advisors, fees vary from one company to another. You can find out by checking the reviews of the consultants we recommend.
Money as a Double Game
An investment is a doubling of money in a way. For example, if you have $ 500 in your bank account, you need to double that amount 11 times to have $ 1 million.
If you already have $ 100,000 in your account, you need to double it four times to make a million dollars.
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06. Remove Unnecessary Expenses
One of the most difficult aspects of personal wealth management is finding the best way to use our money. But many people, no matter how much money they make, are quickly ruined by not managing it properly.
Reducing costs does not mean saving money without spending what is needed, but reducing unnecessary expenses.
Think about how much you spend unnecessarily per day. And it’s hard to figure out how to save big money on a small budget.
If you have the ability to save and invest more of the money you earn or borrow, you can reduce your financial stress.
Purchase items at once. It is best to make a list before you go shopping so that you do not make unnecessary purchases.
You definitely need to have a plan when dealing with money. I have told you before that a fool with a plan can defeat an intellectual without a plan.
When dealing with money, the first thing you need to do is make a plan about how it will be spent. Or, even if you have millions of dollars in your hand, there will be no results.
You need to know what is happening to your money. But plan before you get your salary/profit. If you expect to do this after the cash is in hand, it will never happen. By planning like this you can cut down on unnecessary expenses.
Practical Examples
One day when I went to a clothing store, I was surprised by what was hanging on a label. It said “not to buy what you saw, but to buy only what you needed”. Seeing this, I saw some people put the item back in there to pick it up.
I asked the shop owner if this would help you. He said, “If customers have money, they will come to us.
I know very well that most women who come here buy a lot of things they do not need.” It should not be our duty to completely empty the wallet of customers even if we incur a small loss.
Use this example to see how you can become a productive person by not buying unnecessary things.
07. Create and Keep Acute Risk Account
I have mentioned in previous articles that you should maintain a secret account.
A secure account does not mean that you have money in an emergency. If you are a business person, this is the money you will use to recover if the business goes bankrupt.
During that time, you can use this money to start a new business or build an existing business. Otherwise, even if you have a job, if you lose it, it is the account used to live until you find a job or a source of income again.
But you will not use the money in this account for any emergency. It is a good idea to keep a separate account for sudden death, event, or another event.
The advantage of having such a secure secret account is that whether you have a business or a job, you have confidence in yourself.
08. Save Money for Retirement
If you start saving and investing early in planning your retirement life, you will get better results. If you have not yet started Retirement Savings, it is never too late to start.
Allow for compact interest when saving. But it is better to invest than to save for retirement.
It will be good for you if you can invest more in your youth. Also increase asset earnings. That should be sufficient enough to attract the retiree.
If two people set aside the same amount each year for a $ 4,000 retirement account, they end up with almost double the number if they continue to earn the same return on their investment and retire at the same age.
That is, you should realize that it is cheaper to start early than to save late. It may make logical, perfect sense to start saving early, but it is not always easy. This is because of your reluctance to make monthly savings a habit.
But if you have the instinct to save and make it a habit, you will be happy to see that your account balance grows. How much you should save depends on your current income.
But I think you should save as much as you can. If you can save at least 20 percent of your income, that is a great benchmark. But it is not necessary to save a large amount first. Start small and then gradually raise.
Even if it is $ 50 per salary, after that, try to save a little more each year.
09. Avoid Luxury Buying
Most people buy a large house or a car when they have a lot of money on hand. But it also puts your money in another bond.
I do not mean that you should not buy cars or houses. But think when you are buying luxuries, whether your money is going in or going out.
For example, look at a family economy. 80% of people talk about making hard money. There is an attempt to move forward with that. But they do not have successful results.
This is not because they do not make money, but because they do not appropriately manage the funds. The main reason for this is the unnecessary luxuries you buy.
Many people think that earning more money will solve all the problems. So they are very much interested in the pay rise.
But getting more money does not solve every financial problem. What really happens is that those issues become more complex and developmental.
Do you need abundance
What made some people’s lives even more miserable was receiving more money. Money often highlights something we do not know. In order to do so, people buy a variety of luxuries.
As a result, people who have more money are caught in a sudden storm and swept away. This is often the case with emergency cash winners, such as lottery winners.
The first thing they need to do is invest a portion of that money in a place where money will grow again and again.
It should create money for you even when you are asleep. Then you can buy luxury items with the profit from it.
But the first thing they do is buy luxury items and falling even lower than it had in a short time.
They soon arrive at the starting point. So the circulation of money should be planned before it gets into your hands.
The money should be in your hands only after you have come to a final decision on how to spend it.
10. Use Free Money Management Resources ( Bonus Tip)
Trust me, and you are living in a golden era. Google has the ability to find any information you need as soon as you do it.
Accordingly, learning how to manage money has become an essential life skill. But there are minimal resources available to learn about money for free.
It is difficult to find a large number of books, blog posts, applications, podcasts, etc., that provide free financial information.
So here are some free resources you need to learn about money. I recommend you to the best free resource for personal financial education.
Mint.com
Mint is one of the most popular and personalized financial instruments available to you. You can get this service completely free of charge.
Robinhood App
Robinhood is a direct brokerage service app designed for mobile phones. This is completely free and it benefits from the accrued interest on customers’ uninvested cash balances.
Learnvest
Learnvest is an amazing, useful resource that is considered to be 101 personal finances. Not only will you earn, but you will also be able to learn more about savings, budgeting, taxes, mortgages, investments, etc., through this app.
Robo Advisors
You can even avail of the services of robot instructors if you want. They provide algorithm-based investment services without any human supervision.
These robotic advisors also provide information on goal setting, planning, banking, and investments.
Conclusion
Managing your money successfully should be an ongoing process. Financial freedom cannot be achieved if it is activated for a day or two and then ignored.
You need to schedule regular times throughout the year to assess your financial status. People should always know their income, savings, expenses, and net worth.
Your income, savings, expenses will allow you to determine the progress you have made for financial purposes and whether you need to prepare any budget item for the future. This article gives you a brief overview of how to manage money wisely.
Take the above steps to manage wealth keeping in mind that you will manage your finances better than before.
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