A Beginner’s Guide To Money Management
Not everything we need to know is being taught to us in school. For starters, handling finances is something that most people take for granted and sometimes end up being clueless about. If you are one of those people, then worry not! Learning money management takes time, but it can just as easily be taught.
Here, we will be showing you the essentials such as budgeting, managing credit cards, and most importantly, saving up for the future. In the end, learning these financial techniques for handling, spending, and saving your money will determine your success in life. So continue reading if you are interested to become a better money saver!
Personal Finance 101
Handling your finances is more than just counting. It is also made up of your habits and personal values. Here are a few basic outlooks that will assist you in starting your money management journey:
- Spend Less Than What You GainThe more you save your earnings, the better. It goes without saying that you should spend less than your monthly income so that you are able to have on-hand cash if ever emergency expenses pop up. It also ensures that you have collected investment money for the future!
- Grow Your MoneyWhen you invest your cash correctly, it will continue to increase. Some of the ways to make it happen are through creating an investment account, creating a business, or being involved with insurance companies.
Finding A Suitable Bank Account
It is not a good practice to stow away your savings inside your wallet or a piggy bank. Ideally, you should set up a bank account where you can store your cash, but at the same time, grant you permission to check up on it through an ATM or debit card. While it is simple to apply for an account both online and in-person, picking the most suitable bank for you is harder.
One factor to consider is a bank that offers all the services you need such as debit or credit cards, ATM access, paper checks, and online checking of an account balance, for the least amount of charges.
Creating A Budget
Making a strict budget plan— and actually sticking to it— is a surefire way to guarantee that you are saving more than you are spending!
As early as now, begin by jotting down your monthly earnings. Next, enter your bills and other regular expenses such as rent, utilities, gas, etc. Also, try to collect receipts of all your transactions and sum up everything by the end of the month to determine your total expenses. If it turns out that your expenses are more than your earnings, then start planning what you can cut down from your expenditures that seem unnecessary.
An easier way to help you categorize your monthly money is to follow the following percentages:
- Regular expenses (50 to 60%)
- Spending for wants (20 to 35%)
- Investments (10%)
- Savings (5 to 10%)
Using Credit Cards Effectively
When you become too lax about your credit card spending, you might end up paying for more than what you can manage. However, when you learn how to control your usage, you’ll find that credit cards can become helpful allies! The basic rule to follow, other than paying for your monthly balance, is that you should not use your card to pay for expenses that are way out of your budget. On the other hand, use it only to purchase items within your monthly price range.
How Your Credit Score Works
By definition, credit scores are reports that list down your track record for money loans and determine the likelihood of you paying what you owe. This is used to regulate how much money the financial company can loan to you, the interest rates, and how many credit lines you are allowed to use. There are 5 factors that can have a great impact on your credit score:
- Payment history
- Debt-to-credit ratio
- Length of credit history
- Types of credit
- Credit checks
Saving Up For The Future
Now that you’ve effectively followed a monthly budget plan, learned about handling credit properly, and you are gaining your steady savings, it’s time to learn more about saving up for the future! These come mostly from long-term investments such as insurance companies or investment plans. Instead of spending for wants and lifestyle upgrades, try portioning your current expenditures into investments that can help your money grow in the background because this will be an effective retirement plan and savings.
Managing your money can be tiring to think about. But if you start learning about it today, you will be reaping rewards in the future!
Based on materials from lifehacker.com