How well do you manage your money? Ultimately, your financial success depends on your ability to take better control of your financial affairs.
Here are 5 positive habits to help you manage your money more effectively, no matter how much you start with:
1. Start involving your whole family in the learning process.
Get the whole family involved to learn how to manage money effectively. Don’t keep your financial affairs or investments a secret. Constant communication about your financial affairs is an absolute must if you want to build trust, accountability, and a sense of financial peace in your household.
2. Reduce your debt burden and expenses while increasing your savings.
Could you cut back on your expenses and settle for getting by on a little less? List three to five areas where you could make immediate savings that would allow you to reallocate the unspent money to increase your savings over time.
Decreasing your debt burden may be a long-term goal, but once you eliminate the heavy burden of bad debt, you can start accumulating wealth.
3. Calm down with your emergency fund.
There’s nothing like knowing, worry-free, how you’re going to pay for the next crisis down the road. Your goal should be to build up enough reserves over the next year to cover three to six months of your normal expenses.
Start by opening a savings account or money market account that doesn’t penalize you for deposits and withdrawals. Finally, you can also set aside extra savings for long-term projects like vacations, post-secondary education, or projects around the home.
4. Create balance in your money management plan.
The following money management plan will allow you to build up your savings and reward you for your efforts each month. Start by setting up separate accounts for each of the following categories and allocating funds according to the recommended amounts:
10% of your net income to invest in your financial freedom
Your goal is to set aside money each month and build your capital in different investments.
At no time should you spend capital already invested. You can reallocate capital to fund a project that will create wealth, but resist the temptation to pay all expenses.
10% for your education
Your financial literacy is fundamental to becoming a smart investor. This knowledge can be obtained from a variety of sources such as: B. Self-study courses at home, workshops, seminars, books, CDs, websites and investment clubs.
10% for giving
Giving not only brings joy to others; It also gives you a sense of satisfaction knowing that you are adding value to other people’s lives. Make a habit of supporting your community and helping those in need.
10% for your emergency fund and future projects
As already outlined, set money aside to cover unforeseen expenses.
10% for playing
Life should be enjoyed now and until retirement. A secret to good money management is striking a balance between hard work and self-gratification. Your gaming account should be spent each month on ways that rejuvenate your body and mind, such as: A weekend getaway for two, a meal at a fancy restaurant, or a day at a spa.
50% for essentials
The bulk of your monthly financial commitments or expenses fall into this category. Make a concerted effort to reduce your spending in the early stages by cutting back on certain luxuries or desires. A key factor in moving forward is coming to an agreement with your spouse about how you will manage your financial affairs, including your long-term financial goals.
5. Track your cash flow and net worth.
Your liquidity analysis
An important aspect of controlling your money and being successful in the world of finance is to regularly monitor your cash flow. Your cash flow analysis is a written plan of how you will spend your money. It’s a simple cost breakdown of your expenses, as seen in most budgets, and includes tracking your income and expenses on a monthly basis. Your cash flow analysis should consider several important factors, such as:
• Your budget priorities as a family, based on your passions and dreams
• the impact of your specific family values on your cash flow
• Specific short-term budgeting plans as well as long-term forecasts ranging from six months to one year.
An easy way to keep track of your cash flow is to use an electronic spreadsheet.
In addition to monitoring your cash flow, it is important to value your assets regularly. To calculate your net worth, you must add up your assets and subtract your liabilities. Assets typically appear in the following categories:
• bank accounts,
• pension plans,
• furniture or
• Equity in your personal residence.
On the other hand, liabilities include such categories as:
• credit card debt,
• long-term loans,
• home mortgage,
• Taxes owed or
• unpaid bills.
Calculate your net worth now and then monitor your net worth every three to four months. The easiest way to keep track of your wealth is with an electronic spreadsheet.
In summary, by implementing these 5 positive money management habits, you will begin to achieve your dreams for a better future. Remember that what you put your attention on will increase.