Personal money management is all about how you manage your finance, invest your money and control your spending habits. It is something that you don’t get to learn from school but learn from your experience. It might take some years to become a pro with personal money management but learning the basics is easy. To get started, let us understand the basics of personal money management that will help you to get a groove of your money. Once you get started with the basics then you will be able to create a budget that works for you and start saving & investing money.
We share with you 4 golden rules of personal money management that you need to know for a better financial future. Let us understand how these 4 rules would help you to manage your finances in a well-organized way to leave some room for savings and investment.
The 4 Golden rules of Personal Money Management:
#1. Know the basics of personal money management
You would have grown up learning the basics of maths but not aware of the basics of money management. The basics are as simple as it sounds. In short, your mindset and your habits would define your financial future. Let us start with the basics first:
• Your expenses should never exceed your income
Are you spending more than what you earn and falling in the heap of debts? Then its time to analyze your expenses and know where your hard-earned money goes at the end of the month. If you spend less than you earn, then you’ll have some money left which you can use wisely (either save or invest or do both)
• Look for alternate ways to get more income
Never get satisfied with one income if you wish to become financially secure. You can get second income through lots of ways such as share your knowledge and take tuitions, sell your art, write reviews, blogs etc. A second income would help you to clear off debts soon, reach your financial goals faster or have more savings.
• Start saving as soon as you start earning
The common mistake which everyone does is start saving only when retirement is nearing. If you start saving as soon as you start earning, you would end up retiring as a millionaire.
• Spend every penny wisely
Every penny you spend matters, so it’s better you spend it wisely. Spend on the things that you need and not want, there’s a thin line between both.
• Clear your debts before the deadlines
To avoid paying for the extra interest on the debts, clear off the debts before it crosses the deadlines.
#2. Create a workable budget and follow it
The next important rule is to create a workable budget and stick to it. All you need to do is list down your monthly expenses and income (in separate columns). Now, separate out the essentials such as rent, utilities, phone bills, groceries etc. Analyse the rest and look for the areas where you’re over-spending. Fix an amount to spend every month based on your income and the necessary expenses. For sure, you will be left with some money to save or invest. This is how you make a workable budget.
#3. Use the right tools in the right way
How to save money effectively- should you invest it on something or save in bank accounts? More than just saving money, it is important to do it in the right way.
• Look for investment options based on the risk you can afford
If you started managing your finances well, then you would be left with some savings. If are planning to invest it, then you need to know about the risks involved, profit share etc. You can invest that money in stocks, bonds etc. Before you decide on investing, know about the risks involved.
• Pick the bank that gives you better interest rates
When you choose to save in bank accounts, it’s essential to know about the interest rates, minimum fee, fixed deposits etc. Make a list of the local banks with the interest rates they offer and then choose the one that suits your needs.
#4. Start saving for the future, today
Don’t wait for the right time to start saving for your future. The simple motto is starting soon, save soon. When you’ve just started earning, it might look difficult to save. But even if you manage to put a $100 into your savings, it would make a huge difference in the long run.
Getting hold of your finances is not that easy and doesn’t happen in a day. You will notice a difference in the way you handle your finance, once you understand and follow the 4 golden rules of personal money management mentioned above.