Money is one of the most important things we need to survive in this world. You want food, home, clothes or XYZ, you require money to buy those. We dream of a lot of things that we want to pursue once we start earning. But when reality hits, it’s all different. To make your dreams come true and live life stress-free you need to know the basics of Money Management. You should know why saving money is important so that you can fight tough in diverse situations.
When you look around yourself you might see many people splurging, buying luxurious cars, bags, and whatnot. Most of them are rich but not wealthy. You need not be Rich to become Wealthy. There are a lot of cases where rich people become insolvent or bankrupt soon. Why? The only reason is that they don’t manage their money properly.
Why is it important to Manage Money?
- You will have money for your emergency needs.
- You can easily enjoy your life after retirement
- Avoid Unnecessary Debts and expenditures
- Prepares for the challenges and opportunities ahead
- You make your money work for you
It is only possible to manage your money by planning beforehand. You need to personally plan your money ie. Personal Money Planning. A few planning tips are to :
- Create a document where you have a list of your expenditures.
- Try to cut down unnecessary expenses.
- Know the dates of payments of bills to avoid any charges.
- Acquire Assets not liabilities. Acquire assets that would help you to gain an additional income. This income can be used for your expenses.
- Consult a tax planner to manage taxes.
One of the most important aspects, when we talk about Money Management, is Saving and Investment. Now both of these terms go together. Their literal meanings are
Savings: It is the part of the income that is not spent
Investment: The action or process of investing money for profit.
Why do these both terms go together? Why is it important to Save Money? We all are aware of the term Inflation. If you are not aware of the term it is general increase in prices and a fall in the purchasing value of money. Another important term is Liquidity. It is the degree of how quickly an asset can be converted into its intrinsic value.
Saving is the first step when you save you have extra cash with you that can be fruitful later. But keeping your savings idle and not investing brings the opportunity cost. Your savings tend to lose their purchase value over time. It’s important to invest money at the right source. By this, I don’t mean to say invest all the money you have. You need to keep a few bucks with yourself as savings also because it is the most liquid asset and is readily available to use in case of an emergency. Saving requires a lot of discipline and sacrifices.
Why Saving Money is Important and a few tips!
- It gives you the freedom to live on your own terms
- It gives you financial security for future uncertainties
- You can take risks
Few Tips for Saving: First has to be the basic Cut down on unnecessary expenditures, Make Sales your new friends, Compare and buy, Save more than 40% of your income. If you have more than one source of income try and use only one and save the rest.
Learning Money Management can be a tricky thing. There are a lot of books and podcasts available that you can read or listen to. It will make it easier for you. Take a step to be Ahead.