With the availability of credit cards and online shopping, the world has seen its purchasing power increase. It has never been easier to spend money. Just swipe your card and you’re done. With our generation, it is significantly more difficult as the world is almost completely interacting virtually and almost everything is reliant on ecommerce platforms. As you enjoy a good read about Money Management, an advertisement for that pair of shoes you have longed for could pop up right in your face and get you punching the digits on your credit card for yet another purchase. The purpose of money management is not to outrightly stop our spending. It is to help us know what, how, where and when to spend. We can manage our lives better and avoid unnecessary challenges by knowing when to spend money, how to spend it, and what to spend it on. If you are reading this, you have probably wondered where nearly all of your earnings go. Well, these tips will help you figure that out going forward:
- Take stock and track your spending to improve your finances:
Taking stock involves sitting down to evaluate what one has done with their finances in the past. By taking stock of your finances, you can see what needs to be improved and which habits need to be dropped. Estimate how much of your income has been spent on bills, shopping, travels, gas, miscellaneous and other expenses.
- Create a realistic monthly budget:
You need to come up with a budget after taking an inventory of your finances. In order to create a budget for your spending, you should first note your income, then make a list of your intended expenses. Make a distinction between the mandatory and the variable expenses. Identify expenses that can be reduced or even eliminated. Determine how much money each item will receive. As a general rule of thumb, you can allocate money to each item on your list based on 50 – 30 – 20 rule. In the 50-30-20 rule, 50% of your income goes to essentials, 30% to everything else, and 20% to savings.
- Build up your savings—even if it takes time:
Right now, it’s apparent that a lot of millennials enjoy owning fancy gadgets, travelling, and following fashion trends, among other things. It is difficult to develop a saving culture when these habits persist. In order to manage your earnings, you need to build up your savings gradually. Think about it this way – It doesn’t matter whether I start saving now or not, the years will pass, and I’d prefer to start saving now in order to reap the rewards later on. The longer I wait, the less time I will have later on. You should also keep in mind that it takes time to accumulate a significant amount of money depending on how much money you choose to put aside.
- Be Consistent:
While it may sound like a regular statement, if you don’t persist long enough you won’t see results. You should develop the habit of saving some money on a regular basis if you want to build up your savings. The ocean is made up of many little drops of water.
- Pay your bills on time every month.
It’s recommended that you pay your bills on time each month. You’d then be able to see how much is left to spend. Do not wait until non-essential expenses consume the money meant for paying bills.
- Save up cash to afford big purchases.
This is why a budget is necessary. Budgets show how you intend to spend your income. All purchases, particularly large ones, should be planned in advance. Determine how much income you have and how much you will be able to spend on the purchase. In case you cannot afford it right now, you can save up so you can afford it later.
- Learn about investment.
If you want to find out how to invest your money, the first quarter is a good time to do so. By experimenting with low risk investment packages that won’t break the bank, you will be able to gauge your risk appetite, and that will help you build an investment portfolio. One cannot become a great investor without making a few mistakes and you wouldn’t want those mistakes to be made with a large chunk of your savings. Warren Buffet, the all-time great investor, says that investing is the process of putting your money to work in one or more types of investments, in order to grow your money over time. It is a good time to test out some low-risk investment vehicles with a small amount of money.