Money—the word itself sounds crazy. It is so crazy that it can create a good situation and also create a worse situation than we could have ever imagined. Simply put, money is wealth that can be considered a human’s backbone. Money acts as a medium of exchange, a measure of value, and a means of payment. According to Thomas Jefferson, there is a saying that “never spend your money before you have earned it”. Since human life is full of many needs and wants, money plays a vital role in fulfilling those needs and wants. Generally, there are three basic needs, which include housing, food, and clothing. So to fulfill those needs, money is very important.
According to Gordon Livingston, “Money cannot buy happiness; it can, however, rent it.”
As humans, if we want to be respected, then we should definitely respect others. Similarly, if we want to get free from financial burdens, we should always value money; only then will it value us by saving us from emergency financial situations. “Money is a tool; if used properly, it makes something beautiful; if used wrong, it makes a mess” (Bradley Vinson). As humans, our needs and wants are unlimited, so we don’t want to fulfill only our basic needs; instead, we want to fulfill additional needs like love, peace, happiness, and so on. To fulfill those needs, we also need good economic conditions, and for this, money plays a vital role.
So here are seven money management tips to improve our finances:
- Tracking Spending:
This includes proper observation of expenses, what we are spending for, and what benefits we are receiving. Use a money management app like MoneyTrack to track spending across categories and know for ourselves how much we are spending on non-essentials. Once we are educated on these habits, we can make a plan to improve.
2. Creating a realistic monthly budget:
We should create a budget based on our monthly spending patterns as well as our monthly take-home earnings.
A budget should be viewed as a means to foster better behaviors, such as cooking at home more frequently, while also providing ourselves with a realistic chance of reaching this budget. This is the only way this strategy of money management will work.
3. Paying bills on time every month
Paying our payments on time is a simple way to manage our money intelligently, and it has numerous advantages, including the ability to avoid late fees and prioritize necessary spending.
4. Build up savings:
This involves setting up an emergency fund to help us deal with unanticipated occurrences. Even if our contributions are small, this fund can rescue us from potentially dangerous situations in which we are compelled to borrow money at excessive interest rates or fail to pay our own payments on time.
5. Starting an investment strategy:
Even if we have limited abilities to invest, small contributions to investment accounts can help us use our earned money to generate more income.
Changing our personal habits is the first step toward better money. Some of these changes will be simpler than others, but if we stick with them, we will finish up with excellent money management abilities that will serve us for the rest of our lives.
The stock market, mutual funds, real estate, and life insurance are examples of investments.
- Saving Early:
It is critical that we begin saving as soon as possible. It is also said that today’s savings help protect us from different financial burdens in the future. Let us illustrate this with an example.
Consider Mr. A, who begins saving Rs. 10,000/- each month at the age of 30 and continues until the age of 60. This equates to a savings of Rs. 1,20,000/- each year. Let us contrast this with Mr. B, who begins saving twice as much, i.e., Rs. 2,40,000/- every year from the age of 45 until the age of 60.
- Avoiding debt:
Avoiding debt is another excellent way to enhance your finances. While taking out loans to pursue our life goals is a typical method, it is not without its drawbacks. High interest rates might deplete our savings. Furthermore, taking out several loans lowers our credit score, making it more difficult to obtain financing when it is absolutely necessary or, in certain situations, even a job. As a result, we should attempt to keep our debt as low as feasible. Being reliant on credit cards or incurring excessive debt can have an impact on our budget and become a financial hardship due to increased spending.
Lastly, money is not everything, but it is something that is needed to sustain, and we should always understand its importance.
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