Building Your Wealth Through Financial Management
We live in an era where the world economy is unstable and unreliable. We need to discipline ourselves, correct bad habits and educate ourselves about proper financial management. This may take time, as the proper planning and adjustment to financial habits will not happen overnight. For one to have long term accumulation of wealth, one has to learn to spend only 60% of total income on expenses and keep the 10% in savings. Most people go through life without savings because of overspending. This is a common occurrence which needs to be changed through financial planning and management education.
The following are simple steps how you can change your habits and increase your financial literacy.
Be in control: It is best to know what is happening in your finances. List down all your expenses and subtract this from your total income. The amount left can indicate whether you are overspending or spending less than what you earn. You can utilize one of the available online tools or applications which can help you monitor your finances.
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Save, save, save: It is best to save early and as often as possible because this will instill financial awareness and discipline. Going by the rule “pay yourself first” is simply taking a small percentage of your income and setting it aside for your savings. Open a savings account with high interest so you can deposit your savings there.
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Emergency fund: Another thing that you should do is to put up an emergency fund which is basically the amount equivalent to three to six months of your expenses. You can begin this by getting a small portion of your income and put it in this category. You should never touch your emergency fund until there is an emergency or crisis. To avoid touching the money set aside for your emergency fund, open an account which has no access to ATMs such as a passbook only account.
Don’t just save, invest: While saving lets you set aside your money, investing will help your money grow and accumulate over time. Investing is not easy and it will depend on how risky you are with your money. There are treasury bonds, stocks, index funds and mutual funds. You should determine first your risk appetite when it comes to investing. A firm like St George investment management can help you determine your investment risk appetite and help you with your financial goals.
Learning about financial planning and management as early as possible will benefit you especially in the future.