Tuesday, October 28, 2014

Money Management Made Simple

For some of us, money management seems like a scary, complex and complicated stuff. Thus, we avoid it until one day, something serious happened and we have no ways but were forced to face it. Well, don't wait till your money matter become that bad. Money management only require some simple arithmetic skills and most importantly is being consistent.

Here, I share 5 simple money management skills:

1) Spend Less Than You Earn
We all know this is the most basic part of money management. If what you spend is less that what you earn, then you're in the safe zone. If you want to challenge yourself, try to overspend for one or two months, then you'll know how difficult  it is to pay for the overspent amount. You will know it will be painful to find that extra money to pay for the overspent amount. So, make sure what you spend is less than what you earn.

2) Pay Your Self First
Make sure you pay yourself about 10% of your monthly income. Deposit this 10% in a different account so that you can save it aside. Promise yourself that you will not touch this savings unless it is emergency. Make a short term / long term plan for this savings - such as down payment for a car, a house, wedding, retirement, etc. You have to pay yourself first, otherwise, after you settle your monthly utilities, credit card, and other invoices, you will have nothing left. If you pay yourself first, then you'll have to adjust the expenses with the remaining 90% of your salary.

3) Avoid Bad Debts
Bad debts are like credit card debts. I know it's hard to overcome the temptation to spend using credit card. But, you must remember - if you spend the future money by swiping your credit cards, it will take you at least twice the effort to pay it back. If you've started the swiping the credit card habit,  you will find that it's hard to control that habit. So, use the credit card wisely.

4) Grow Your Money
Once you've got some savings, learn to grow the money. Try with some investment products such as unit trust. Do not invest all in one go, but do it step by step to test the water. When you feel more comfortable and confident with your investment strategy, you can top up or diversity your investment. Do not expect your money to grow overnight, but do allow for a few years before you can see the result.

5) Protect Yourself and Your Wealth
You should know that all cars on the road must have insurance coverage. You are much more important than your car. So, make sure you have enough insurance coverage. This is even more important if you have family - a wife, kids, other dependent. It's now too common to hear serious sickness. With a good coverage, at least it can lessen the family burden during difficult time.

Actually, money management is not that complex. It is much simpler than handling a bankruptcy situation. Learn to know more about financial literacy and tackle the skills step by step, one at a time. Over the long run, you will be able to see the result.

photo credit: StockMonkeys.com via photopin cc

1 comment:

  1. Good tips on managing money. There are many challenges the working class face but with sound mangement the burden can be greatly reduced.