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How to Manage Your Money Better in Five Easy Steps
Money is anything used to exchange goods and services. Money, in the business world, is what blood is to the human body. The roles that money plays in our daily lives cannot be overemphasized. It is common, yet very few people understand how to deal with the challenges that arise from its use.
Your money is an important part of your life. The amount of money you have can determine what you do, where you go and how you live every day. Therefore, learning how to manage money is an important step in taking control of your life. In order to be able to use your money well, you must first understand the source of your money and how you spend it. Make sure that the way you manage your money is aligned with the things that are most important to you.
Most importantly, the secret to living a cashless life is to develop effective money-making habits. Fortunately, you don’t need any degree in finance to be a good manager of your money.
Now let’s take a brief look at those simple steps that can help you manage your money effectively.
1. Set a budget and most importantly, stick to it. The rule is to spend less than you earn. Having a budget helps you track your spending, that is, you know what you spend money on, every day. You might be surprised how much that little money you spend on simple things adds up. Another good way to track your spending is to open a bank account.
2. Understand your income stream: Know what you earn from your job or business. Know your true income. If you are a salaried individual, your actual income is your salary minus mandatory deductions such as taxes, gratuity and other statutory deductions required by your employer. If you are an entrepreneur, put yourself on the payroll and train yourself to live within the salary as if you were an employee following the principles mentioned above. This is what accountants refer to as net income. Budget your remaining income. You cannot manage your financial resources properly if you do not have a clear idea of what those benefits are.
3. Actively manage your bank account. Some people don’t pay attention to what’s going on in their bank accounts. Keep a record of all additions to your bank account and all withdrawals from it whether directly from the bank, checks or electronic channels such as ATM machines and POS terminals. At the end of the month, make sure that what you have in your account matches what you expect to have based on your calculations. Where you cannot explain any difference in the number, contact your bank immediately for clarification.
4. Start saving: You have a budget; you track your spending and maybe spend less than you earn; now is the time to start saving. You should have a savings account and after you get your monthly salary or income from your business, put a part of it in the savings account. An easy way to save is to give a standing order to your bank to transfer a certain amount of money to a savings account after your salary account is credited. If you save 10 percent of your income each month, you will be amazed at how your savings account will grow each month.
5. Invest: By investing a portion of your savings, you are actually getting your money to work for you. Set aside some money in your savings account for regular investments. There are many options available to you to start investing like stocks and mutual funds. For a beginner, mutual funds are a safe and easy way to start investing.
Most importantly, a common source of financial problems for many people is bad credit. By bad borrowing I mean when you borrow money to support consumption rather than to acquire income producing assets. If you manage your money well by following the steps mentioned in this article, you will have less reason to borrow money to meet your daily needs. Managing your money well will help you manage your life. If you use your money well, you don’t have to worry so much about your finances.
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