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Manage Money | Money Management Basics - 6 Must Know Tips
Money management Basics Without Mathematics
Many of the people get a headache when they hear about finance, budgeting etc. They simply feel that they are not good with money and calculations. Such paranoia occurs because their mind is not able to comprehend how the money comes in and goes out. They never know how much balance is left with them unless they open their wallet and see. In This article explains some simple yet mind blowing money management basics you can follow everyday in your life without having a mathematical brain! If we deeply study, Management principles like Deming’s we can observe that making change in our style of doing things can in fact impact the statistics of it result. Unfortunately, most of us practice the reverse. The easier way is not to quantify things and control the statistic but to analyze the root of reason and correct the basics. Smart money management can significantly impact your financial stability. It’s just like ‘a penny saved is a penny earned’. The following money management basics can help you save some pennies every time you shop.
The 80-20 Rule to Mange Money
Only the 20% of you purchase cost you 80% of your expense and the rest of the purchase would be the real things you need. Suppose you spent a $40 a week buying grocery, confectionary and other house hold stuff. Suddenly you have a fondness for playing games and buy a $150 xbox. And at the end of the week your expense reach $200. Tracking out this ‘20%’ of your purchase that would cost you the major 80% and cutting them out can help manage money better and stay far below the budget. An example spread sheet from my accounts is given below. The fields highlighted in red illustrate the things which amounts only 20% of the things I purchased in that month but consumed 80% of my budget.
Have you been a victim of Impulse Purchase?
Resist Impulse Purchase - The Secret Trap Behind Credit Cards
Do you know that in a way you are being exploited while you make a big purchase thru credit-card. The merchants hold on to a property of customers called ‘impulse purchase’. Imagine you don’t have a credit-card (no don’t faint, just imagination), while window shopping by the end of the month you find an interesting new $120 canon digital camera that can capture even in the faintest light. It’s the end of the month and you don’t have any money in your account. You walk away thinking that you could buy it sometime next month after you get your wage. Now, suppose you have a credit card at this moment, your make the purchase of the digital camera using the credit card thinking that you can pay the money when you get the wage next month. This purchase phenomenon is called ‘impulse purchase’. So next time when you see something that you don’t really need at that moment, just imagine that you don’t have a credit card.
Keep separate accounts for Savings and Purchase
If you are especially not good at remembering the balance in your wallet, don’t worry. Keep a separate saving account and deposit the money you want to save for later in that account at the starting of every month, and spent the rest as without just vague calculations. Carry along only the atm cards for your purchase account. The benefit of this technique is that the more you have in hand the more you feel to spend. When you carry a large amount together, every offer on the street seems to pull you in.
Post-pay your bills at Familiar Stores
If the store you make most of the common purchase is a familiar store where you can keep an account and pay it together at the month please do it so. Because carrying around change makes you spent it on trivial things. And those small amounts of money could eventually amount huge at the end of the month and still remains unnoticed by you. However I don’t suggest to follow this for pay-as-you-use services such as mobile phones, internet connections etc.
Take With You Only The Money You Want
For our routine tasks which we’ve been doing for months like going to work, going to college etc we will be having an estimated maximum expense we’ll have when we go and return within the first few weeks after following the routine. I used to take my whole months budget in my wallet when I go to college whereas my classmate who was staying with me used to take only what he’ll need for the day. At the end of the first week itself I end up bankrupt by lending money to my friends, sponsoring drinks for them and spending on absolutely unnecessary things. Finally I borrow from my classmate who stays with me to meet my expense to the end of the month. This is what happens you take more than you need when you know what you’ll need.
Use Free Google Spreadsheets To Manage Your Money
Track your Expense On A Spread sheet
This is one method ‘you got to try it to love it’. You can use services like google docs to create a spread sheet of monthly expense. You don’t need to enter about every penny you spent but it’s a good way of tracking the major expenses.This can help you to track out where the money went and give you insights on how you can fix the money-leaks for the next month. An example spread sheet of my November month expense is given at the top.
These are the 5 eye-opening money management basics you can learn without attending a financial management class. They are relatively simple to follow and evidently less mathematical. Hope it helps you keep your wallet heavy!