5 Golden Rules of Personal Finance… You were probably taught some basic math growing up, but a lot of people make it all the way to adulthood without ever learning basic money management. Skills like creating a budget or investing for the future are startlingly rare skills.
Managing your finances seems nothing, but a lot of paper work and numbers. You make X amount of money, you spend Y amount, and you try to make sure Y is less than X. However your finances are just as much about Psychology, habits, and the values you choose to live by.
Here are a few rules that will always help improve your financial life.
Budget making is very important, as it is one of the essential keys to managing your finance. Keep track of all your expenses. You don’t have to limit yourself, just get an idea of what you spend your money on during any given month. Save all your receipts, make note of how much cash you expense to credit cards and figure out how much money you have left over when the calendar turns.
- Spend Less Than You Earn.
If you earn 1.2m/year and you spend 1.3m/year, you will end up in a spiral of debt that is hard to walk away from. If you spend exactly as much as you earn every year, you will never be prepared for emergencies or major life challenges. Spending less than you earn allows you the freedom to save, to prepare for the future and deal with the inevitable crises, life throws at you. The bigger the gap between your income and your spending the better.
- Take Stock of Your Spending.
This is very important, a peculiar part, you need to play. After the first month, take stock of what you spent. Write down, what you actually spent, categories your purchases in a way that makes sense to you.
A simple list of your monthly expenses might look something like this.
1. Monthly Income: $3000
i. Rent/Mortgage: $800
ii. Household bills: $175
iii. Groceries: $300
iv. Dining Out: $125
v. Gas: $100
vi. Emergency Medical: $200
vii. Discretionary: $400
3. Savings: $900
Pay yourself first. If you wait until you’ve met all your other financial obligations before seeing what’s left over for saving, chances are, you will never have a healthy savings account or investment. Reside to set aside a minimum of 5% to 10% of your salary for savings before you start paying your bills. Better yet, have more money automatically deducted from your pay check and deposited into a separate account.
- Make Your Money Make More Money.
Want to know how the rich keep getting richer? It’s very simple, it’s because money can grow while you sleep, provided you save some of it. Properly invested money earns more money over time. Don’t just suck all your cash away in a low-interest savings account. Invest in things that will earn you more money than you had before. Sometimes it called an investment account, but sometimes it’s starting a business or even getting an education to get a better paying job.
The most important personal finance rules don’t change. What your grandparents did may not work for you. There will always be newer, better tools to manage your money. However, spending less than you earn will always be beneficial. Investing your money will always be better than doing nothing with it. And planning for the future will always be better than blowing your paycheck as soon as you get it.
It’s always our excitement, hearing from our audience. If you have any feedback, questions or concerns, please use the comment box below;
Hope this article was helpful? If yes, don’t hesitate using our share button below to inform friends and relations from facebook, twitter, Whatsapp or Google +
Career Province Team.