Managing money is not sorcery. With the right tips and the right lifestyle, it’s possible to earn money and save money. Of course, you need to avoid mistakes that cause the outflow of money. Maybe not a truckload of money but definitely a decent sum. Both earning and saving come under money management. In this article, we’ll discuss money management at length. If you are curious to know what is the best way to manage money, keep reading.
I bet most people are somewhat good at saving money. Yes, they need advice here and there, but overall they know how to save. The problem starts when one gets serious about earning money because it is not easy even for people with the right skill set and contacts.
It’s 2019 and earning money has become a bit more difficult than before as the competition has become immense. At the same time, many new doors of opportunities have opened up that were sealed before. The key to constantly earning money irrespective of what trade you are in is to understand the market and adapt to it. Smartphone sales are at an all time high, time to get a job in the sales department of a Smartphone manufacturer or a dealer. Stock market looks bullish, get your hands dirty with investment tricks.
You need to constantly learn, unlearn and relearn. Also, be open to new ideas and suggestions and acquire new skills to make more money than what you are making now.
Income and expense ratio
The golden rule of maintaining a budget is to create a ratio between income and expenses. To formulate and maintain the ratio, you first need to understand your expenses. It’s not hard if you know how to categorize your expenses. Some expenses like grocery, electricity bill, insurance premiums, etc are absolutely necessary. Other expenses like dining out every once in a while, going to a movie theater, etc are leisure expenses. These expenses are luxury, not necessary.
Why categorizing your expenses helps?
You can decide how much of your income should go meet what expense and create a ratio based on that. People normally spend the largest chunk of their income for grocery bills, stationary goods, electricity and Internet bills. However, you don’t have to follow this rule. If you feel something that is of little value today could yield a high return in the future, don’t hesitate to invest in it.
Simply put, there’s no optimal ratio. It’s all up to you.
Save for retirement
People save for retirement all through their life. It’s like nourishing a tree hoping it will yield fruits after growing up. When money management is thrown into the mix, it maximizes your retirement savings.
How can you do that?
There are couples of strategies that you can adopt. First thing you need to do is open an IRA account. Making a choice between traditional and Roth IRA may be a bit hard; my advice is choose the one that suits you best.
The 401(K) plan is very important. You need to contribute to it. I advise you to hire a financial advisor. An advisor knows what tax bracket would suit you best. The 12% tax bracket might sound tempting if you don’t want to feel a bite in your monthly budget, but a Roth (401K) feature comes with an expansive list of benefits even though it uses income after tax.
Planning for retirement saving is no different from overall financial planning. You get better at it by taking advice from professionals and apply your own intelligence. Systematic retirement saving is among the best ways to manage money.
Polish your credit report
Think your credit report only decides the likelihood of getting a loan? Think again. An excellent credit report improves your financial position; it helps you in more ways than you think. You get better car insurance rates, teleservice providers will ask you to sign a contract with them but without the “necessary” security deposit. In other words, a positive credit report opens many doors of opportunities for you to manage your money.
What do better auto insurance rates mean for your finances? It means you won’t be hard-pressed to pay it every month. You can save the money or spend it on some other purpose. A polished credit report, therefore, is essential for wisely managing money.
Consider debt consolidation
If you have debt, consider merging them. There’s a disclaimer though. If you think you can pay off the debt in a year or two, don’t go for consolidation. Consider consolidating your debts if and only if the cumulative amount is difficult for you to repay. Students are the biggest demographic that opt for debt consolidation. So if you are not a student, carefully weigh in the pros and cons of debt consolidation before giving it a final thought.
Money management is easy when you follow the right steps and make the right decisions. There’s no universal definition of right decision. Follow the tips shared here and trust your gut. Only then you’d be able to manage your hard-earned money.