“Money” is one term and around this term, our daily life schedule revolves. That’s right! From the current budget for groceries this month to five-years financial planning, it all depends on money. In such a situation, effective money management is important. However, many people question that with everyday spendings- how to manage your money? To this, one simple solution applies, I .e.., managing money tips. To begin with, some money management articles will lead you to many options. These include mutual fund schemes, Ponzi schemes, gold investments, equity investments and more. However, in our view, you must always start fresh and small when it comes to personal money management.
Do you read many money management articles? In these articles, you will find some basics such as: Cut down on luxuries. However, in today’s world, 70% of people find luxuries as their big comfort. For example, a motorbike is a necessity, but a car is a luxury. In the support of this statement, here’s a fact: In the USA, in 2017, there were a total of 270 billion registered car owners. Therefore, it has become quite clear that the main question here is “how to manage your money
In this reading, we are presenting a brief introduction to the concept of the following:
- Money Management
- Barriers to savings,
- How to manage your money worksheets? and
- How to avoid barriers to savings?
Table of Contents
What is personal money management?
Personal money management is a term that connects and generates a balance between an individual’s overall earnings and spendings. The difference between the two given factors is known as “Savings.” For the most part, the main goal of personal money management is generating savings by deducting spendings. However, the concept of how to manage your money? is not that simple.
Various money managing tips include various strategies that lead to doubling your savings. Some people also prefer investing money in the market in the form of bonds, equity or shares. But, in these schemes, the risk of loss is equally countable, likewise profit. When it comes to savings, there are some saving barriers.
What are the barriers to savings?
Savings barriers or Barriers to savings are financial factors. These include actions that lead to reduce the difference between an individual’s earnings and spendings. Check out the following list of most common savings barriers:
It is a barrier where your expenses are more than or equivalent to your earnings. For example, you take a mortgage with a 4% interest per month leading to 200 USD as a repayable amount. If your per month earning is 400 USD, you are losing 50% of your earning and thus, there’s less possibility of savings.
It is a barrier where your expenses are not as much, but the income is low. Therefore, savings are not a possibility.
Lack of knowledge
It is a barrier where an individual does not hold less or any knowledge related to saving tips, schemes, and spending triggers. To remove this barrier, you can read a number of effective money management articles online. You can also download some personal financial management PDF files for further reference.
Interest-driven debt & borrowings
In the lives of working people, borrowing & debt can be constant. However, in the first stage of debt, we do not realize that debts are interest-driven. We often consider that we would have to pay an extra coin while repayment of debt. However, that’s not true.
For example, if you have borrowed 2000 USD on a 5% interest rate, do you know you will pay an extra 100 USD per month? This extra payable amount reduces the potential of savings as per the universal money managing tips.
Let’s find out how to remove money & finance barriers? by following up some high-end and proven money managing tips:
How to manage your money?
Personal money management business is complex. There are many gaps that you cannot fill in the short run. Follow the given below beginner’s guide to money managing tips. This guide includes resolutions to the most common personal money and finance crises that one faces on a regular basis. Let’s begin:
The first step to personal money management is Income understanding. No! We are not talking about knowing what’s your income, but observing some crucial income insights. For example, what all expenses do your current income cover? Are there any income deductors present? Does the income seem enough as per your job role? All these factors provide you a bigger picture of where you are lacking in the concept of Savings. Therefore, in this way, you can easily track down the barrier or barriers to your savings.
For example, not enough income to cover all expenses shows Low-income barrier. On the other hand, unaccountable expenses show spending triggers. For the most part, by understanding your income, you can find a resolution to your savings barrier. In this money managing tip, one element that shall remain in mind is potential savings and current savings. Potential savings are the savings that you could have or can save in the future. However, current savings are the savings that you have made in the present. Please note, the fact that current saving is zero, it is still considerable.
Do you hold a “how to manage your money worksheets?” Well! If the answer is NO! In that case, you have no track of your expenses throughout the month. Let’s assume that you earn 2000 USD per month. Can you remember every little thing where you have spent 2000 USD altogether? Sounds complex, doesn’t it? What’s the solution to this?
To begin with, the personal money management app offers a few suggestions. Such as for a month, an individual should record each small and big expense in a computerized worksheet. At the end of the month, sit down and start observing the expenses you have made from the beginning of the month. Now, note down the following factors:
- Reasonable expense
- Unreasonable expense
- Basic necessity
- Expense on Luxury
- Expense on debt
- Unavoidable expenses
- Avoidable expenses
By reading these notes, you will find out where you are lacking the ability to manage your money.
Budget creation is all about scheduling all necessary expenses. You can think of this process as making a schedule for your studies. However, instead of the syllabus, you will be putting your expenses to fit your earnings along with a savings column.
Apart from this, one should also count in payable debt, interest on borrowings, insurance premiums, mutual funds and more. It will help you toeliminate any possibility of Budget loophole.
Debt Stabilization is tricky. It is because it makes the money manager feel anxious and worried about the possibility of bankruptcy. However, that’s the worst-case scenario. What you can do to consolidate your debt is focus on paying off the interest in the first place. Let’s assume that you have an education loan.
You can visit the home branch and ask the loan manager to fix a per-month loan installment including interest. This will allow you to get back on track by paying off a little amount each month without piling up on ended interest payments due for years.
In this step, we recommend the readers to create a funds account where he/she can put a minimum amount of money each month. However, the best trick to benefit from this is– not actually recording this fund in any ‘how to manage your money worksheets?’
What is this fund for? The impromptu fund is for emergencies. For example, you must consider the possibility of the following:
- Natural disasters,
- Health problems, and
- Universal financial crises like the great depression.
Thus, in times of crisis, an impromptu fund helps you to recover from the problem without touching your personal savings. It keeps you calm and delivers peace of mind that you are not entirely financially empty.
Official Retirement Plan
When you are young and working for a well-paying company, you may not think of the possible financial crisis in the future. Of course, everyone desires to spend a night in a casino in Las Vegas without worrying about the next paycheck. Is this a matter of personal money management? Well! Definitely. To this, the solution is an official retirement plan. If you don’t have much information about what’s retirement and how do you choose a retirement plan? You can communicate with the finance department. Indeed, nowadays, many organizations offer the following:
- Retirement schemes,
- Provident fund schemes,
- Income Tax Return
You can also connect with banking institutions which offer 100% guaranteeing retirement schemes. Even though you are in your early 30s, you can sign up for a retirement plan for 20 years. Thus, by the time of your retirement, you will have an assured retirement fund amounting up to 40, 000 USD.
Maintain your credit score
One of the major factors of how to manage your money effectively? is the credit score. For the most part, in times of need, various finance & banking institutions offer support. However, this support remains valid. To begin with, the finance and banking organization checks one’s credit score. It helps to validate any small or long-term loan or mortgage with a repayment expectation.
To maintain your credit score, you can follow the given below credit score managing tips:
- Set up reminders for every payable amount on minimum credit card payment.
- Rather than making payment all-at-once in a month, you should make payments on a weekly basis. It improves your credit score.
- Avoid closing or deactivating your old credit cards. It is because old credit card history makes your credit score. If you close it, your credit score will drop.
- When you make payment for a deactivated debt, this will reactivate your debt.
- Register for a Debt Consolidation program that offers consistency for paying-off debt in a fixed period of time.
Download Personal Money Management App online
A personal money management mobile application helps the user to keep a track of money. from savings made in the current month to extra or unusual expenses, this application gives you a perfect “how to manage your money book?” do you know? Money management apps also offer tax calculations and deductions possible. When you enter credit card information in this application, it also notifies when your credit score fluctuates.
How to manage money for students?
As a student, you are solely responsible for your own earning, savings and expenses. Thus, you can control every aspect of money during your college life. If you are a student and looking to manage your finances, follow the given below money managing tips and apply as per the possibility and scenario:
Get a part-time Job
Sometimes, the money that you receive as your pocket money is not enough. College students love to hang out, go on happy meals and trips. How to manage expenses among these extras? Well! The best solution to this is to get a part-time job. Many restaurants pay 10-12 USD per hour. By working four hours a day, you can earn up to 1000 USD a month.
Start paying an education loan early
By connecting with your bank, you can start paying-off your education loan early by using the income coming from part-time jobs. This technique will help you from overpaying interest in the future. Above all, you can also improve your credit score by maintaining a monthly or weekly transaction to the banking institution.
Closure for how to manage your money effectively?
Money makes an individual powerful. However, when you are out of it, you can seriously miss being able to have fun and maintain a social life. Without a doubt, money makes you present as well as your future. Thus, with the help of this money managing tips, you can prepare yourself from the future financial crisis beforehand. These tips also improve your potential for passing a loan, getting a job overseas, and studying abroad.
For any further queries, you can connect with our financial management experts. Drop your queries in the comment section and receive a money management tip that can make your day. Happy financing!