You must have seen a lot of articles on the Internet with titles like “What are the best money management tips,” “How can I manage money better” and felt tempted to read those articles.
What is money management?
Money offers you options. Having money in your wallet means having options to do certain things. What these things are going to depend partly on you and partly on how much money you have. If you have $100 in your wallet, you can buy a pair of jeans but cannot afford a cruise vacation.
Money management means handling money carefully to increase its inflow and stop its outflow. Going on a cruise vacation may seem impossible at this moment, but if you manage money effectively, it won’t remain a distant dream for long. When done right, money management takes you one step closer to fulfilling your goals.
Money management must do’s
Like every other thing, there’s a list of must-dos everyone who takes money management seriously needs to follow. There’s also a list of “don’ts,” but we can skip that list as the “dos” list is pretty expansive. Let’s get started with the list.
Diversify your income sources
Would you put all your eggs in one basket? I guess not. Then why are you stuck with just one source of income? It’s best to diversify your sources of earnings. If you are doing a 9 to 5 job, start investing in the stock market. Don’t go for the future and options right away. Invest in equity. With time you will acquire enough experience to be a day trader, and then your earning will increase tenfold.
Have you ever invested in real estate? It’s easier than you think, and the market is not as cryptic as some other industries are. If you have inherited property or land, consider renting it out for additional income. If your credit score is above 700, take a loan at an affordable premium rate and start an online business. Keeping track of everything may be difficult, so I recommend personal finance tools to manage your finances.
The safety-first approach
While income diversification is strongly recommended, going overboard is not. Remember that you are not a gambler; you are prudent and sensible. That’s why you need to choose the safety-first approach. Diversify your earning, invest in new fields, own assets for the future, but always have the safety net ready just in case.
What does a safety net mean in a financial context? It means having an emergency fund which you can use in time of a crisis. An investment may not bring the result you expect, or it might backfire and put you in a spot where you owe a massive debt to someone or some large corporation. If you plan your workarounds in advance, you can overcome the hardship. A workable plan is one that is based on the safety-first approach.
What kind of person you are and what motivates you are both important when it comes to money matters. For managing money more effectively, you need to reevaluate your needs, wants, and priorities.
Love shopping? Spend a huge deal of money every month shopping for clothes and accessories? If yes, then maybe it’s time to cut down on your monthly shopping budget. But before doing that, ask yourself how you view shopping. Are you an impulse shopper? If yes, then it’s time to change yourself. Grocery is a priority for all of us. Give it more important than shopping.
The more you understand yourself, the easier it becomes for you to manage money.
Don’t trust banks blindly.
This is important advice, and I want you to pay attention here. The cumulative debt in the United States is steadily on the rise. The debt has almost doubled over the last decade. If the debt crisis is not handled properly, it will create a mess, and banks will expect you and million others like you to clean it up.
Yes, reputation matters, but during the 2008 recession, some major banks were forced to shut down their business. The safe way to survive a financial apocalypse caused due to mismanagement of funds by banks is to invest in multiple physical assets that you can sell off on short notice.
As discussed in the article, money management understands the nature of money, what relationship it has with you, and foster that relationship. When you follow the tips shared here in this article, you nurture this relationship and become better at managing money.