If you don’t care about your money, your money won’t care about you. It makes sense, unless you are born with a gold mine. But still, you have to take good care of your gold mine.
It just like your family, you don’t take care of your wife or husband, very likely they won’t care about you too.
What are the 5 Easy Ways To Manage your own money? Where to start and how?
1. Salary / Income
The first thing that you need to know: how much is the net income you make. In other words, the total amount of the money you make monthly.
Other income can go to the government retirement scheme or income tax. If you are self-employed, you have multiple income streams. It is good to know what is the exact amount of money you can get to manage how you should spend it.
For example, $5000 is the total you receive, $2000 is the total amount for your monthly expenses.
$2000 is all you need, $3000 is what you can keep, for better use, or a better lifestyle spending.
List down other income sources that help generate sides income, or any source of income.
It can be some freelance jobs, selling old stuff, dividend from the stock market, part-time job/ business, and so on.
2. How to start saving?
After we know the total amount of cash we have, we can start calculating the committed expenses.
For instance, your house bank loan, your car loan, insurance, phone bill, home utility bills, etc.
Then the remaining cash that we have, it is always good that we can save 10 – 20%, the more you save the more you can plan to grow it. Continue to find ways to grow its value.
- Save for house deposit. Buy a house to rent it out for passive income, let the rent pays for your bank loan repayment.
- Put money into explicitly doing all time well blue-chip companies in the stock market. I mean extremely well business in the past 10 years if not 20 years. To save guard your money, you can pick the top businesses in the Nasdaq, S&P500, or any index. ETF is a good way to diversify your money.
- Read more about how to invest safely here in the stock market.
Read more about why do we have to grow the value of our savings overtime here. What is inflation, what is exponential growth and how the rich get richer?
Otherwise, you will choose to spend them on our lifestyle:
- Our lifestyle can be, cheap and good food, or the expensive restaurant food
- Netflix at home or the latest movies in the theater
- The local street coffee stall or the Starbucks coffee chain that everyone is drinking
- Staying home reading a book or the weekend cafe-hopping time killing lifestyle
- Running or working out at the community center, at the park, or the premium gym center in town?
a) Main Reason of we can’t save money: Our Lifestyle
Lifestyle is something that cannot be easily defined and it is all about the individual.
Some of us enjoy a good coffee in the cafe and willing to spend more on quality coffee beans, environment, and food, whereas some enjoy much at home, some can enjoy just take-and-go coffee from the neighborhood coffee shop.
Some of us eat to live, some live to eat. It is individual preference. Some 50% eat to live, 50% live to eat, some of us able to balance it well.
Some of us spend on designer bags to keep, some own them, collect to sell for more values. Guys love to keep limited edition toys, shoes, cars, luxury watches. Some sell it, some use it to flaunt, some keep it till they die.
b) Achievable goals
My suggestion to you is to always set a goal.
What do you need the saving for? To buy a classical piano? To buy a car for your family? To go for a trip?
Once you know the key reason, the faster the money you can save, the sooner you will reach your goal. Write it down, remind yourself daily, and focus on the goals.
We will not spend all we have. So what goal is big enough to control our spending?
How about travel around the world without a budget? Buying a family car for daily usage.
Goal examples, to buy a house that belongs to you. Okay, it’s boring, and it is not even achievable in some places. Remember to start with a small goal.
To save up enough money to earn enough dividends from the stock market, that can cover annual expenses (THIS IS POSSIBLE GOAL) and we do not have to work again.
You can also to start a business and not to work for other employers ever again.
3. What to do with the savings?
Before we reach our goal, where shall we keep our money?
Our money is depreciating overtime placing them in the bank or even at home in a Milo can. Money value reducing overtime, due to the nature of our economic environment.
Consumer goods are getting more expensive, thus, we spend more on the same things or services we used to spend on.
Our money has to suffer from the inflation rate. Each year the average inflation rate in the world is about 2%. Some countries are slightly higher, it can be as high as 3.5%.
That simply means that, if our money sitting in our savings bank account, or sleeping in our bedroom, the value of the money is getting lesser value than its value year by year. It is just simply the nature of the world of the economy.
Bank can give you a return of 0.3% – 1% from a saving account, as of a return.
Some offer a fixed deposit, the return can be bargained, and in order to be able to beat the inflation environment, make sure the interest rate that the bank offers you, can be better than the inflation rate, which is what mentioned above, 2-3%.
c) Investment – Put your money to work
Often heard the surrounding people said that they invest in their clothing, their car, watches even their boyfriends and girlfriends.
Let me clarify to you, an investment that does not have the potential to make you profit, in the form of returning of values or money, we do not consider that as an investment.
4. What to do to make our money increase its value?
Keep looking around and do not stop searching for ideas to grow the value of your money.
To avoid being risky in all kind of investments, it is always better to learn how to do, and what to do first, before we dump our money into it.
They are people who make money, and of course, people that lose money.
If we do not know the game rules, most chances we will lose the game. There is a lot of knowledge and information we can find on how to grow your money, to fill us up before we start dipping ourselves into the deep blue sea.
Make sure you learn how to swim, fully equipped, and aware of the water current first, before you fully dive in. Once you do all the safety practices, very unlikely we will lose money in our investments.
5. Let’s set a goal first
These are 5 Easy Ways To Manage Your Own Money! Do you have a better idea of how to manage your own money now?
Let’s set a not too big, not too small goal first. My goal is to continue to save up money for investment, especially focusing on passive incomes.
It will eventually make my money work harder than me physically working for money.
Let me know what is your goals below, do feel free to leave me some comments and thoughts!