Finance

Finances: a basic guide on how to manage your money

Knowing how to properly manage your finances is a must. Check out this easy guide on how to control your money earnings and savings

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Knowing how to correctly assess your money in a way you make sure you have a tranquil life is harder than it seems. There are many stories about people who had really fat paychecks but could never be out of the sea of debts, so to say.

So, we can see that simply gaining a lot of money monthly is not the solution to having a healthy financial life. There are more things related to this subject that needs to be discussed in order for a person to have the ability to manage money.

What is the importance of knowing how to manage your money

With that little meditation, it is safe to say that only gaining more money will not solve your issues, that is a fact. The thing is many people truly believe that when they begin to make more money, all their problems will simply vanish. This is completely wrong.

You see, when one’s believed that the solution for a situation is only one thing, it is easy to not be able to see the big picture.

Well, this guide will be shown some key aspects you have to be looking for if you are willing to have a more healthy and stable financial life.

Some aspects will be discussed and after that, a simple method about how you can make a simple budget can change the way you deal with your money

The 3 main areas of money management.

When talking about economics, we may be dazzled by the numerous terms and techniques that may be presented to us. But managing money relies on these 3 main areas.

How much money do you make?

No wonder why this is the main “solution” some people give to their financial life. It is really important to have a good source of incoming. Even if it is not that stable (especially if you work with investments).

 It is important to have at least an idea about your average income, so you can prepare your budget properly.

Now that we have discussed the elephant in the room, let’s talk about the other aspects.

How much money do you spend?

This is the most important aspect of how you get control of your money life back, yet it is one of the less discussed aspects.

In a world where we have access to credit cards, financing tools, and deferred payments it is very easy for a person to lose track. Some people sit and ask: “Where did my money go?”

So, if you don’t know where to start getting your money management back, take a piece of paper and list down all the debts and bills to pay and list them. If you can add to this list your household budget, better yet.

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This way, you will be able to see where is your money going, but not only that, but also you may be able to see where you can make some economies, so the next you think about owning a debt, you will think twice.

Where do you spend that money?

Imagine that you have a thousand dollars to spend every month. If you spend it only on frivolous things, chances are you will be making more debts in no time.

However, if you spend these thousand dollars on education, stock market actions, and other investments, it is safe to say that the quality of how you are spending your money is far superior in the latter than in the beginning.

So, take your piece of paper and look for where do you spend your money and ask yourself, is it really necessary?

The 50-20-30 rules

Now that you understand the basics of how to properly manage the money will make and spend, here is a very simple tool that can help you have more control of your money.

You don’t need to make these proportions overnight, you can gradually put your bills in order and the final step is this method.

The 50-20-30 rule states that:

  • 50% of your earnings must be used for those expenses you cannot avoid, which include groceries, house bills, transportation, and insurance
  • 30% of your earnings can be directed for the things you don’t need, but want to buy, like clothes, recreation, and travel. After all, Coffins have no drawers.
  • 20% of your earnings must be for savings and investments: “Pay yourself first”. This means that you need to take part of your money and used it for savings and investments. This way you will always have money for some emergencies.

These are some simple goals that you can follow that will definitely help you on your journey to being the master of your money, not its slave.

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