Beginner’s Guide On How to Manage Your Money

For people who venture into something lucrative, and earns income on daily, weekly or monthly bases, one of the challenges they face is being able to manage the money they make due to daily life demands like paying bill, taking proper care of one’s self, feeding, rents and the rest of the things.

Making out good plans to manage your money better can really pay off. It can help us foot our bill and still enable us save some money at the end of the year. These yearly savings can help us pay off accumulated debts, put them towards your pension, or spend them on your next car or holiday.

As humans, one of our greatest fears is to see our accounts hit rock bottom before the next income and leaving in fear of an unexpected expense that’ll put you in the hole. Well, if this sound like an experience you’ve had before, you are not alone. Many people are worried about money and barely making ends meet. In fact, nearly 60 percent of Americans don’t have enough cash on hand to cover a $500 expense, according to a 2017 Bank rate survey. Even at that, you’ve probably seen other people living well. Sometimes you even wonder what their secret to making the most of their money is. There is no secret formula in it, the truth is how to manage your money effectively.

Before now, we learn to save money with our piggy-banks much before we learn to spend money on the things we want.

We grow up listening to our parent’s advice about investing and saving money. Yet an increasing number of young adults in the world are struggling to manage their finances.

Today’s youth have access to a variety of consumption avenues such as online shopping, entertainment, and leisure activities, fine dining and alcohol, and recreational travel than ever before.

Due to this, a good number of them of them save and invest only small proportions of their income, have challenges of managing credit card payments and student debt, and often look up to their parents for temporary bailouts.

There are three principal core discipline formulas of managing money:

1. Live within your means

2. Create a strategy for covering debt and credit costs

3. Work toward a secure financial future.

We will now take a look at the various ways or means in which we can manage our finances in other to have savings for emergency spending.

Find out the leaks in your ship

Begin to monitor all the small purchases you make on a daily basis, the random coffee, the Uber ride back home, the short weekend trips; all these small expenses cost money. Take a close look at your expenditure on entertainment, lifestyle, and leisure activities to know where to cut down.

Budget all your recreational expenses

Beginner's Guide to Managing Your Money

Know how much you need to budget for recreational and leisure expenses such as going for a trip or paying for your guitar lesson. Creating a budget will make it easier for you to prioritize your needs and allocate funds to your hobbies, interests, and passions while also helping save money.

Create a basic investment portfolio

Start investing simply by sharing some portion of your salary in a recurring deposit that offers a higher rate of interest than a simple savings bank account. Once you now understand how to commit some savings to an RD, you can move on to other financial products like low-risk mutual funds and corporate bonds that are low risk and give better returns than FD.

Build a credit profile

If at some points, the plans to buy a car, house or any other thing in future come to mind, first of all, build a solid credit history. This can be done by taking a small personal loan or a credit card. By doing so, when you make timely payments on your loan EMIs or credit card purchases, you build a positive credit history and banks become more likely to lend to you at lower interest rates in future.

Build your financial IQ

Spend more time in increasing your financial IQ and becoming wiser about how to manage your finances. While getting fundamental knowledge by reading books and online resources, consult or have a word with experienced investors and financial professionals within your social circle to understand how they make financial decisions and learn from their experiences.

Increase in one’s financial knowledge will help make well-informed financial decisions from an early age and avoid rookie mistakes later on in life when faced with making challenging decisions.

Building healthy financial habits takes a lot of practice and perseverance. In time, one will start seeing the results they want and have healthy spending and savings habits.