Money is an important part of our lives. The sad reality is that financial worries don’t just go away.
We have to deal with this for our entire life. Whether it’s something you often think about at the back of your mind or a current situation you are struggling with, money is always something we have in mind.
It does not matter who you are or your current financial status; good money management skills will give you peace of mind throughout life.
Having that in mind, below are the three golden rules to managing your finances that everyone should follow.
How to manage your money well
Don’t spend more than you earn
Rule number one is as easy as it sounds. Most people spend so much in a day that it is possible to exhaust all the earnings in the first week of the month.
From keeping up with the fashion trends that will see us buying a bunch of expensive designer clothes, shoes, and bags, to eating out on a regular, to random shopping, we never fail to have something to spend money on.
At the end of the day, if it is not within your financial capacity, why do you have to strain your finances and sink into debt? Your expenses should be within your earnings.
Always have a budget to guide you on how you spend your cash. Avoid spending on anything outside your budget. If possible, avoid walking with your credit cards to avoid temptations on spending unnecessarily.
Spending more than you earn will result in taking up loans. Borrowing loans becomes a habit just like an addiction; it becomes hard to stop.
The interest from the loan will take up a significant part of your earnings, plus the payment of the loan itself. This will be the beginning of your financial crisis that will be hard to jump out of.
It is wise to be humble and work with what you can afford. If you can’t afford it at the time, leave it, but you can work towards getting it. Plan and save for it; that’s the solution. The moment you end up broke in the middle of the month, then there is a problem, and you need to figure it out quickly.
Save whatever amount when you can
From a recent statistic, half of the people in their 20’s and early 30’s have no savings whatsoever on their name. This means they are living off their payday to payday earnings.
With the rising cost of living and stagnant salaries, it is a precarious situation. It is important to have control and proper management of your finances.
Savings is one way to establish financial security. You could be wondering where you will get the money to save. It is simple. You can start by foregoing that morning Starbucks or even spontaneous online purchases.
This can change your financial position drastically. Always look for possible ways to cut down on your costs and fish out the extra money you may have been spending unnecessarily.
Saving does not mean you require a lot to start with. Put aside that $50 from your income and make it a habit. In one year, you’ll have made at least $600. Seeing the fruits of your savings will be a motivation to continue with newly formed habits, and soon it’ll be your lifestyle.
Why should you save? You may wonder.
Having some extra money aside goes a long way in helping you through financial emergencies.
In case of anything, you’ll always have some money to push you through. May it be you lost a job or you retired, you can still be financially independent.
If it’s a medical emergency or education fund, you don’t have to get anything from your pocket and interfere with your budget.
Avoid the pitfalls of credit cards and bad debts
Credit cards are not a bad thing only if managed well. Credits cards have a ton of benefits like managing your cash flow, building your credit scores, and offering rewards for your purchases.
This takes us back a bit to the first rule, only spend what you earn. Credit cards require discipline because they are tempted to spend more than what you have.
Having no credit card is not an issue; it makes you financially safe. However, at one point in your life, you will need a credit card. Be sure that you are, however, getting it for the right reasons.
If you know you aren’t too good at controlling your spending habits or getting one to purchase things you otherwise cannot afford with your earnings, you better rethink this decision.
Keep off the credit card until you can trust yourself to be more responsible with your money and spending habits. Nonetheless, if you are looking to get a credit card to build your credit score or have the protection that comes with a credit card, get a prepaid card instead.
Your credit limit and the monthly earnings are not similar. Using a credit card makes it easy for you to lose track of what you ought to be spending against your bank balance.
Spending more than what you earn mean that you will fall into debt and have to clear the interest each month as you struggle to earn the bill as well.
In a nutshell, spend what you have in your pocket and avoid debts from credit cards unless you are sure you are able to pay back every month. Remember falling into debts will disorient your finances and land you in a crisis.
Learn how to manage your cash right
The three golden rules are quite easy to imagine but hard putting into practice. It takes a strong mindset, determination, and discipline. However, you need not worry.
Technology has got you covered. Mobile banking, automation, and synchronization of accounts and apps break down your expenses in a month. This makes it easy to put these ideas into practice.
So why not start right away?