Today we get inspired by the world’s most successful investor, not so much for his stellar achievements but rather for his simple, no frills approach to investing and to life in general. We will be looking at 4 simple steps to manage your money instead of letting it manage you.
- Set Up a Budget
A budget is a great way to start getting on top of your finances. It doesn’t need to be complex – it just needs to be realistic and comprehensive. Some typical items you need to budget for:
Household bills (including utility bills like broadband, wifi, electricity bills)
- Family and Friends (socialization expenses like movies, dining, etc)
- Leisure (travel, hobbies)
- Financial Products
Depending on your level of sophistication, you could either record it online or on a piece of paper – but the important thing is, you need to stick to it.
2. Expenditure Tracking
Is your bank account balance permanently malnourished before the end of the month? You need to keep close tabs on where your money is going to – before it is all gone.
One method to track expenditure is to keep a spending diary and record all your expenses. Once you get it going for at least a month, you can have a very clear idea on where your money is going , you can actually preemptively make conscious decisions next time you are able to spend on something. (Is that latte going to make me broke after 6.5 days?)
3. Pay off the higher interest loans (if you have any)
Credit cards are a dream. A beautiful, wonderful dream – for bank revenue. Most average around 24% per annum for the convenience most people crave for, that rate could actually make some loan sharks blush.
It definitely makes sense to clear off the highest interest rate loans you incur first to reduce the amount paid on interest – something that is intuitively clear to many people. In theory.
4. Set a savings goal
We cannot understate this. Earn more than you spend, and it guarantees happiness. Spend more than you earn, and misery will come a-knocking soon. The act of saving does not come naturally to some of us, but like with all things, this is made easier by setting a goal.
One such goal might be to set up a short term savings amount (usually 3 – 6 months of monthly expenditure), to keep you going if things are not going so well in the short term (unexpected loss of a job, career switch,etc)
Once that has been achieved, it would be prudent to set up goals for other things like:
- Further education
- Children’s education
- Retirement nest egg
Money management is a lengthy and complex subject but if you start with these 4 simple steps, we guarantee the future look a lot brighter – with less worry.
Do any of the tips resonate with you personally? Let us know in the comments below!
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