How to Manage Your Money?
Personal Finance - How to Manage Your $$$ In 5 Simple Ways
If you are in a lot of debts,
If you have trouble saving money every month,
If you wish to be richer,
Well then, this lens is created perfectly for you to sort out your finance!
Follow these simple steps and your finance will be in tip top condition in no time! Read on.
Plan Your Budget!
Basically, everybody should have a lifelong financial plan that goes like this: Make Money, Save Money and Grow Money.
To accomplish this, you need to have a long-term plan, a medium-term plan or a short-term plan which continue throughout your life to reach the ultimate lifelong financial goal.
So, when you receive your paycheck at the end of the month (or the beginning), start planning how you are going to spend that money! You should plan your budget something like the picture shown. (Click on the picture for larger view)
In my own words, your money should be allocated for the 3 main categories, which are:
1. Necessities (about 50%)
2. Desires (about 30%)
3. Extras (about 20%)
We shall talk about what to do with these extras in the following steps.
He who fails to plan is planning to fail.
Pay Off Your Debts!
So what are you going to do with the 20% extras of the monthly budget?
First and foremost, use that money to clear out your debt! As the saying goes, paying off the debts is the best investment!
It is indeed very true because credit card balance (one example of debt) will charge up to an interest of 10-25%, depending on where you are. Hence, the 10-25% you pay off is actually 10-25% earned!
Therefore, before you start thinking about saving or investing, you'd better pay off the debts first!
Paying off one's debts is the best investment!
Once you've paid off your debts, you can start thinking about saving. But why should I save?
First, you would need to build about one third of your income and save it into your regular savings account. This is known as the Buffer Fund. It serves as your monthly cushion in case you overspend.
Next, you would need to build the Emergency Fund, which is about 3 months to 6 months worth of your salary. As the name suggests, this is to prepare you for rainy days.
Once you've built these two funds, then you're ready for Investment!
Build Your Buffer & Emergency Fund!
Buffer Fund is about 1/3 of your salary while the Emergency Fund is about 3-6 month worth of your salary
Increase Your Income!
If you have troubles executing step 2 and step 3, which is to pay off debts and save money (even after you have budget your money), then you might need to look for ways to increase your income.
There are mainly two ways to increase your income, which are through side income and/or passive income. Basically, side income is taking up a second job while passive income helps you earn money even if you're not working.
Check out these websites below to find out more about how to take up side income and passive income!
Side Income & Passive Income - Check these useful websites out!
- How to Increase Your Income?
Ideas to increase your income
- Ways to Earn Extra Money
Looking for ways to earn extra money? Then, consider these ideas...
- Four Ideas to Help You Make More Money
"If you want to get out of debt or simply improve your quality of life, you may be looking for ways to increase your income..."
- Five Ways to Create Passive Income With Little or No Money
by Brian Lee on October 23, 2006 (Not me anyway!)
- How to Earn More and Work Less
"Do you want to continue working 50, 70, 100 hours a week the rest of your life? Do you want to be able to take time off whenever you want to, without worrying about what's going to happen to your business?"
- Finding Passive Income Sources for the Future: Four Potential Avenues I’m Evaluating
Lately, I’ve been looking at sources of passive income in order to bolster (and hopefully eventually replace) my current income...
Now we've come to the last step where you grow your money. Once you have paid off your debts and built your buffer fund and emergency fund, then you're ready for investments!
There are many instruments of investment but basically let me introduce you to these major types:
1. Stock or Shares
3. Mutual Fund or Unit Trust
4. Property or Real Estate
5. And many other derivatives...
To learn more about investment, check out these great tutorials by Investopedia at http://www.investopedia.com/university/buildingblo...
VIDEO - Personal Finance - Mint.com's Three Principles of Personal Finance
Books On Personal Finance - Buy @ Amazon
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