Quote of the Week: "If you wish to get rich, save what you get. A fool can earn money; but it takes a wise man to save and dispose of it to his own advantage." - Brigham Young.
One of the greatest skills you need in life is money management. It is needed for survival regardless of our background or personality. Strangely, it is not taught in most schools. Most of us do not learn this skill at home either hence we are left to learn through trial and error or from other people’s mistakes.
1. Make a Surplus Budget You Can Stick To
Great money managers tell their money where it should go. They don’t wonder where it went. If you want to be one of them, make a budget. Not just a budget, but a surplus budget, which is one where your income exceeds expenditure. Then save the surplus. Or invest it and re-invest the returns or save them. Great money managers are savers and investors, not spenders. Do not, however, make a surplus budget you cannot follow. There is no point of struggling to survive while hoarding a pile of money, we are not advocating for struggle but for financial freedom. Never make a deficit budget, in other words, do not let your expenditure exceed your income.
2. Consume Consciously
Half the job in money management is dealing with your expenditure. How do you manage what you have efficiently and effectively?
A budget helps, of course, but that is only half the job. If you want to attain financial well-being, you need to spend your money consciously. Try and eliminate wasteful spending as much as you can. Ensure that your spending is aligned with your budget and your vision. Before making any purchase decision you need to think it through. Imagine if someone gave you back all the money you have spent on impulse spending. You would be surprised how much that would add up to. Why not try and avoid impulse buying instead?
3. Save and Invest
If dealing with your expenditure is half the job when it comes to money management, the other half is increasing your income. It is guaranteed that our expenses will increase over time due to more responsibilities and inflation. Your income has to keep up and one way to increase it is through saving and investment. Saving in a piggy bank does not help in this case. You have to save where the interest rate is higher than the inflation rate, this is how you beat inflation.
But just saving is not enough especially if you have ambition, you have to invest as well. Great money managers understand that saving and investment go hand in hand. Know your risk tolerance before you start to invest since risk and return are joined at the hip. Saving comes first and provides the means to investing. Saving should be done in a convenient, safe and reliable avenue where the interest earned is also competitive.
Conclusion: These basics will help you improve your money management skills, create a habit out of them. Because that’s what it’s all about, creating a habit. You have to make it a lifestyle. So go forth and create a habit that is rewarding.