Getting a paycheck on a constant basis is indeed exciting. It doesn’t matter whether you’re employed or you are your own boss, you are always looking forward to the next payday.
But unless you manage your finances exquisitely, you’ll easily get sucked into a never-ending cycle of living from payday to payday. In this guide, you’ll learn some essential money management skills and how they can light your path to financial freedom.
Understanding the concept of money management
Money management is a well-thought-out plan of that involves budgeting for the available resources, saving as well as investing the surplus. It’s a critical first step to achieving financial freedom and breaking from the ‘rat race’ yoke of living from payday to payday.
Over time, money management should help you move from a point of over relying on a paycheck to a point where you’ve control over your spending and investment habits.
5 Essential Money Management Skills You Should Have
Budgeting for your income
A budget is a list of your priorities against the income realized. The key aim of budgeting is to help you spend money on what actually matters. In a word, a budget is a tool that helps distribute your income and ultimately improve your financial status.
Paying your taxes
This one makes a lot of people uncomfortable. People dont like the idea of paying taxes. Paying your taxes, however, to the authorities is much like a honeybee taking care of the flower it perches on.
The taxes that you pay help the authorities of the day provide essential services and stabilize the economy. The end result is the availability of jobs or business opportunities that guarantee you an income at the end of the day.
Saving the excess
Savings whatever extra you get is an important step to achieving your financial objectives. Through savings, you can create a safety net to cushion you and the loved ones during an emergency, investing in financial demanding projects and achieve other important financial obligations.
Managing your debts
Debts can sink you into a life of misery and financial shortcomings. It doesn’t matter how small a debt seems to be, failing to keep control what you owe others can be a source of agony as the debts can build up over time and end up make you a slave of your creditors.
Saving is, of course, a wise decision in the journey to achieving your financial freedom. Even then, investing whatever you’ve saved is the key to actually living a full circle.
Investing back whatever you have earned will help you build a solid source of income and reduce your reliance on whatever you earn from your employer. A good investor has in-depth knowledge of whatever area they are willing to invest in and are also willing to take the risk that comes with investing in such a venture.
8 Reasons to Get Your Money Management Skills Right.
Equipping yourself with money management skills accelerates your journey to living that life you’ve always cherished. With the right skills, you can grow a meager salary to a significant earner and you can even handle a windfall just in case you win the lottery. Specifically, here are 10 reasons you should get your money management skills right.
Investment in the right retirement plan
No one wants to retire on empty pockets. Yet, lack of good money management skills can sink your retirement years into misery and financial agony. Even if you’re on a company’s pension scheme, you need to boost your retirement jackpot through managing your money discreetly and setting aside some cash to boost your already existing retirement pack.
Gain peace of mind
Having money management skills helps you accumulate savings that you can then use to cater for unexpected expenses such as sickness, job loss, destruction occasioned by a fire outbreak and such. Knowing that you have some money in the bank gives you some security and peace of mind.
You’ll be able to track your expenses better
Spending money on a whim can leave you broke and troubled. You can hardly point to a project that you’ve accomplished using your hard earned money as a larger percentage of your income will be going to an unaccounted for expenditures.
But once you wise up and master some money management skills, you will be able to track your expenses and evaluate the relevance of each expense you register.
Reduce recurring expenses
One you develop the habit of listing down your expenses, you will be in a better position to scrutinize your spending habits and eliminate or minimize any unnecessary expenses.
These can include expenditure on items that replaced by other existing items, items you rarely or need and many other expenditure types that you can forego.
Avoid unnecessary charges
Having a budget minimizes the risk of failing to pay bills on time and thus incurring penalties for missed deadlines. While individual penalties may seem small, they can add up with time and eat into your savings and investment capital.
By updating your money management skills, you will always know when it’s time to pay which bills.
Improved living standards
Money management skills do not help you to track and refine your expenditure but also involve planning on how to invest any surplus that you accumulate over time. When well done, an investment can yield a further income and this will ultimate lead to improved living standards.
Makes it easy to achieve set goals.
How do you save enough to buy a house or that treasured car when there are a thousand other things you could spend your money on? Well, it’s only through managing your finances skillfully.
Money management skills will help you navigate through periods that you are likely to spend your money on not so necessary items. This way, you can accumulate enough cash enough to achieve a long-term objective.
A repeat cycle of unpaid bills and lack of money to use at home can be a source of conflict between couples. Multiple kinds of research have shown that financial conflicts can lead to complications such as extreme anxiety, high blood pressure and of course, a breakdown in communication.
Having some money management skills can help you set aside a percentage of your income to cushion you during the hard times.
Money management skills spell the difference between those who go ahead to achieve their dreams and those who end up in the never ending cycle of living from paycheck to paycheck. Master money management skills today and you can be sure you will experience a great change in your financial tidings.
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