Money plays a significant role in our lives. Many people spend their maximum time and energy on earning money, but still they are not able to create a financially stable future for themselves. All this is due to the lack of proper knowledge of money management. The art of managing money is not something that is taught in school or college. But everyone must deal with it at some point in their lives. Being able to manage your money effectively is important to everyone. Whether you are a college graduate, a single mother on social welfare, salaried employee or a multi-billionaire, if you don’t know the rules of money management, sooner or later you are more likely to run into serious financial problems.
Here are some steps to help you manage your money more effectively –
Record your expenses
The first step is to keep track of all your expenses. There are usually two types of expenses – Regular and Irregular. Regular expenses such as rent, electricity, groceries, laundry, fuel, entertainment, domestic help etc. are unavoidable but can be controlled by proper planning. On the other hand, Irregular expenses include going on holidays, buying consumer durable items, etc. Before investing your money in these, make sure to do a proper research about the price, quality and place from where to buy.
Set up a budget
Once you have an idea of your total monthly expenses, now it’s time to record your expenses on a budget. A budget is a summary statement of your expenses and income over a period of time. It will help you to have a control and understanding of your finances. A person with a proper budget will be able to pay his dues on time and make provisions to achieve other goals as well. Creating a budget is one thing, but if you are not following it faithfully, why bother?
Remove unnecessary expenses and save money
After preparing a budget, try to put away at least 10- 20% of your income as savings. If your expenses are too high that there’s not enough money left for you to save, it’s time to slash some unnecessary expenses.
As your savings starts increasing, you can invest them in various investment options. Before that, you need to make an investment plan based on your needs and goals. There are various alternatives available such as Mutual funds, stocks, real estate, savings accounts, fixed deposits and many more. You can also invest your savings into various retirement plans to live comfortably and independently at old age. Before investing in stocks or other financial instruments, consult a financial adviser or try to gather full information about that particular stock.
Some extra tips to manage money more effectively-
- Pay your bills online when possible.
- Avoid late fee charges by paying bills on time.
- Don’t overspend on gifts.
- Always review your credit card statements for errors, erroneous charges, signs of fraud and identity theft.
- Maintain an emergency fund. Try to keep three to six months of living expenses in the bank.
- Avoid interest payments whenever possible
- Use credit cards for purchasing things only if you can pay it off in full at the end of each month.
- Always examine various payment options like zero-interest EMIs while buying an expensive item.
- Don’t hesitate to ask for complementary services and discounts.
Improve your personal finance today, it will not only enable you to live a good life right now, it also ensures that you can do or have things later on in your life. Things that maybe you never thought possible!