Tips on Money Management
Financial literacy is not something fantastic, it’s just a knowledge of some principles. They are not a mystery and in many thematic books, you can find some excellent advice. However, there is no need for a comprehensive approach, because half-measures are not able to give the desired result.
I have collected most of these tips in this article and will consider each of them separately. But first, let’s talk about why many people can’t be financially literate. Or rather, about excuses that people make up for themselves.
Justifications for financial illiteracy
It’s all about how we look at wealth accumulation. For example, you may have many limiting beliefs about money that have formed in your psyche over the years as a result of nurturing or traumatic events.
It must be said at once that beliefs influence the way you look at money, both for the better and for the worse. Beliefs are deeply rooted in the person psyche and often prevent him from making the right financial decisions.
It’s an addiction that we’re responsible for. For example, watching TV, sitting on the Internet with no purpose or meaning, playing video games, impulsive shopping. They distract us from the idea that we can become a wealthy person, that is, become a kind of protective mechanisms.
These excuses are usually formed by the phrase: “I do not have the necessary connections to become rich”. To some extent, this may be true because the people with whom you communicate determine your thinking.
Except it’s still an excuse. Especially in the information world, where you can get acquainted, if not with the greatest businessmen, then at least with quite ambitious.
You need to stop apologizing to yourself. Firmly decide that you are ready to change your mind — this is the right thing to do. It may take years, but it will pay off in full.
How can you learn to manage money?
Start keeping the budget
It’s the basis. A budget is not only a record of income and expenses but also a plan to save money and invest.
Many financial experts believe that the budget should be conducted on the principle of 60/30/10:
60% of the income should be spent on your needs;
30% of the income should go to your needs;
10% of the income should be set aside.
However, if you want to become financially independent, you have to put yourself in more difficult conditions. For example, a budget may look like 50/10/40 or even 50/5/45. It all depends on your living conditions, your income, and expenses.
Of course, you have to not only keep records but also manage your finances. This is what the following information is about.
Minimize your monthly expenses
It should become a habit. Once a week, think about what expenses can be reduced. It is important to be in a good mood and not to think that you are making sacrifices. Turn the process into a game.
Here are three key questions to help you stick to this rule:
Do I need this?
Can I do without it?
What are my options?
Save the money
The more money you have deferred, the stronger your financial position. To adjust your thinking properly, ask yourself the following questions:
Why do I want to start saving?
Why is it important for me?
What are the long-term consequences of this habit?
We will talk about this in more detail later.
Spend only your money
No matter how advertising does not assure you of the benefits of another loan offer, even if you need to use it — approach it carefully.
Take on a loan and dispose of other people’s money is not a lot of minds. This habit leads to wrong thinking, or even to a debt hole.
Create a financial cushion
A financial cushion is the amount of money you could live on for 6 months if you lose your job or all sources of income. This time is not only for finding a new job but also for finding yourself, developing your skills, learning, and reading.
Some people create a financial cushion just to get away from work temporarily and develop themselves or, for example, write a book. This is also a great solution, just remember that it won’t be too easy to get back.
Calculating a financial cushion is easy enough, although some people use long formulas. Find out how much money you need to live for a month — just calculate the expenses for the last six months and give an average. This will give you an approximate total result.
Of course, a financial cushion does not take into account inflation, rising prices and contingencies, so it is better to attach a reserve fund to it.
Set financial goals
It is psychologically very difficult to save money or save if you have no goals. I keep asking myself, “What am I suffering so much for?” If you don’t find the answer, you give up.
So set yourself financial goals. Here are some examples:
Become financially independent
It means to get such passive income to become independent from work. You can quit your job and live off the money that goes into your pocket.
How much money do you need per month to feel good about yourself? Write down that amount. After that, start thinking about what you need to do to get this passive income.
Get financial protection
It’s a simple goal: how much money do you need to cover all your monthly needs and set aside a certain amount? For example, you make a thousand dollars, of which you set aside two hundred dollars each month. You spend the rest. If that’s enough, it means you’re financially secure and able to feed yourself at this stage in your life.
Get financial security
It’s a certain amount of money that will allow you not to depend on other people. It is needed if you want to go to India for a year to get acquainted with the culture of this country and to practice spiritual practices there. How much money do you need to do that to quit and not ask anyone for money?
To learn how to manage money, you have to start saving it.
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