Money is everything that is used for the exchange of goods and services. Money is, in the world of commerce, what blood is to the human body. The role money plays in our daily lives cannot be overstated. It is ubiquitous, but very few people understand how to deal with the challenges that arise from its use.
Your money is an important aspect of your life. The amount of money you have can determine what you do, where you go, and how you live on a daily basis. Learning to manage money is therefore an important step in taking control of your life. To manage your money properly, you must first understand where your money comes from and how you spend it. Make sure the way you manage your money fits with the things that matter most to you.
Very important, the secret to living a financially free life is to cultivate effective money habits. Fortunately, you don’t need a financial degree to be a good manager of your money.
Now let’s take a brief look at those simple steps that can help you manage your money efficiently.
1. Set a budget, and most importantly, stick to it. The rule is to spend less than you earn. Having a budget helps you keep track of your spending, that is, knowing where you spend your money on a daily basis. You might be surprised that those small amounts you spend on a certain routine add up. A good way to keep track of your spending is to open a bank account.
2. Understand the flow of your income: Know what you earn from your job or your business. Know your true income. If you are a wage earner, your actual earnings are your earnings minus mandatory deductions, such as taxes, pensions, and other legal deductions that your employer must deduct at source. If you are a businessman, put yourself on a salary and discipline yourself by living within the salary as if you were an employee by following the rules highlighted above. This is what the accounts refer to as net income. Budget based on your net income. You cannot properly manage your financial resources if you do not have a clear idea of what those resources are.
3. Actively manage your bank account. Some people don’t pay attention to what happens to their bank accounts. Keep track of all additions to your bank account and everything you have withdrawn from it, whether directly from the bank, checks, or electronic channels like ATMs and POS terminals. At the end of the month, make sure that what you have in your account matches what you expect to have based on your estimate. If you can’t explain any difference in the number, contact your bank immediately for an explanation.
4. Start saving: You have a budget; you track your spending and you’re probably spending less than you earn; now is the time to start saving. You must have a savings account and once you receive your monthly salary or earn income from your business, save a part in the savings account. An easy way to save is to give your bank a standing order to transfer a certain amount of money to a designated savings account once your salary account is credited. If you save just 10 percent of your earnings each month, you’ll be amazed at how your savings account will grow each month.
5. Invest: By investing part of your savings, you are actually making your money work for you. Set aside a portion of the money in your savings account to invest on a regular basis. There are many options available to start investing, such as stocks and mutual funds. For a beginner, mutual funds are a safe and easy way to start investing.
Most importantly, a common source of money problems for most people is bad loans. By bad debt I mean borrowing money to finance consumption instead of acquiring income-generating assets. By managing your money well by following the steps outlined in this article, you’ll have less reason to borrow money for your everyday needs. Managing your money effectively will help you take control of your life. If you manage your money correctly, you become less anxious about your finances.
