10 Simple Rules to Manage Your Money Smartly
By Sadiya Anjum
As a kid you may have always been generous about your allowance and spent according to your whims; taking it for granted that your money management skills are latent not non-existent. But unlike before where you could always beg your parent for a few extra bucks, as an adult you are responsible for your own financial well being. Some of us are ignorant of money management concepts and some of us know them but find it difficult to implement them. Irrespective of which case it is, everyone needs to know a few basic facts about money and need to implement them if they hope to not live/ die cold, alone and hungry. Here are a few that can help you out:
Planning your income
Your total income should cover three aspects: reducing debt/ loans, paying bills; covering daily expenses; and savings, investment, insurance. Each time you bring home a check, make sure that it covers all these aspects. Ignoring one or the other will land you in trouble at some point.
Planning your expenses
The above rule is simple to understand but difficult to live by. Thanks to credit cards we tend to live above our means. Old grandpaís rule stands true: earn more spend less. This is difficult to implement but not impossible. It is the only way that you can hope to achieve financial stability and success.
Scrutinize your expenses honestly
To save the bigger picture you have to delve in to the smallest details. Careless money spent on a cappuccino regularly could have added a few extra bucks to your pocket at the end of the month. Distinguish between needs and wants. In reality there are few things that we really need, all the rest results from our own desires. This is not advice to make you stingy but to be smart. Know where to draw the line and always spend within your limits.
Buying more home or more car than you can actually afford is like taking a plunge stark naked into the Arctic Ocean. Your limits have to be placed not just on your expenses but even on your investment like a home. Before taking on a loan, make sure that you do actually need a loan and how much you can realistically afford. Making assumptions based on hope (Iím sure I can take on an extra job over the weekend) or ignoring the issue blatantly (Iíll somehow manage) is plainly put, a bad idea. No point in counting the eggs before they hatch especially when you donít even own a hen.
Saving for the rainy days and the later days
You need to make sure that you save some amount consistently and systematically. Your savings can be deliberated for emergency purposes, a planned vacation or retirement. Saving for rainy days will help you sleep better at night; spend this money when it is pouring not drizzling. Ensure that you have a retirement fund that you absolutely do not dip into. Accept it: you are not immortal, your body is going to get weaker and you will need the money.
Know which aspects of your life and your valuables need insurance and make sure that you cover them. There are no guarantees in life but at least insurance will save you from drowning. Donít ignore this aspect; analyze risks you may face and try to protect yourself from them. But do not over insure any item or aspect.
Investing is a smart way to earn more money and gain security for yourself. But when investing you need to do it smartly and carefully. Analyzing risks, determining its feasibility on your current financial status, the returns you can expect and in the time frame in which the returns will be available, are some of the basics you need to consider before investing. If you are new to the game, then start out with small, minimal risk investments.
Credit card Watch
It seems almost impossible to live without a credit or debit card. While it is natural to spend using plastic you need to know where to draw the line. If you are going to be charged for each transaction under a credit/ debit card, then think of the money you can save when paying by cash. But the more pressing problem lies with the urge to spend with plastic thinking that you can pay later. When the bills mount at the end of the month, it is not going to be a pretty picture. Impulsive and unnecessary shopping is usually encouraged with a credit card in hand.
Saving with tax deductibles
Most of us are ignorant of the finer points related to taxes. Getting intimidated and hindered by financial jargon may actually be letting those extra bucks slip out of your fingers. Make an effort to know more about areas where tax deductibles are applicable and direct your money towards them. Save your money creatively and smartly but with full knowledge of your actions.
You can read a thousand books but it is you alone who can determine your values related to money. Laying too much importance or too little can make life difficult. Prioritize the various financial aspects of your life and allocate your income accordingly. Remember that Ďliving upí beyond your means for the sake of appearance or luxury that you cannot actually afford will lead you into trouble.
Read more but know that only with a few mistakes will you actually learn. Work out a plan for your self and stick to it. Try and keep things simple, live within your means and save for the proverbial rainy day.
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