In recent years, people are increasingly faced with the problem of lack of money because they do not know how to manage their money competently. Unfortunately, not everyone has learned financial literacy, and you cannot do without it in the modern world. What to do? The main thing is not to panic. Today Colonel Penny will tell you about financial literacy, how to properly manage your money and how to form your budget.
Effective ways to control your finances
Based on the most popular tips of successful investors, we can formulate the golden rules of personal finance management:
- Spend less than you earn.
- Save. Save slowly but steadily.
- Prioritize your financial goals.
- Don’t pile up debts.
- Ensure your risks.
These are fundamental principles of financial success and can be used not only for personal financial management but also to manage an organization’s finances. Let’s now talk about each in a little more detail.
Analyze your emotions regarding money
We are all used to being able to judge financial money in numbers or percentages. But it’s a little more difficult than that. Money is emotionally colored. So when talking about money, it’s not enough to arm yourself with a calculator. It would help if you also listened to your emotions. If you’ve never done it before, think about how you feel about money and write down your first ten associations.
What makes you happy? Try to understand what scares you when you hear “money” or think of a large sum. Have you ever thought that only cynics and materialists overthink money? Do you associate money with stress and anxiety? Maybe you think that money will never be enough? Or vice versa – if a lot of money comes to you, will it stay with you forever? What risks are you willing to take? These are the main questions that will help you better understand your relationship with the subject of money.
Set specific goals for yourself
What do you want to buy with the funds you have set aside? Try to answer this question in as much detail as possible. As a rule, people save a certain amount of money to buy different things later: equipment, a car, and their home. Some people build up capital to start investing. Decide exactly what you want. You shouldn’t put money aside to have it. It would help if you were clear about what to spend it on. If you create capital just for fun, then be prepared that you will be caught up in reckless spending: entertainment, going to revelry events, thoughtless spending money on fleeting pleasures. In this case, you should not expect any progress.
Collect all your financial reports
Every financial paper will play a massive role in budget planning. What needs to be collected? Bank statements, credit card statements; utility bills; insurance policies; mortgage contracts; pension reports, and investment reports.
The more information you gather about your expenses and income, the easier it will be to keep your budget under control. Please keep all the paperwork you need in a safe place so you can use it whenever you need it.
Determine your net income
You need to determine the exact amount of your monthly income. It’s not just your paycheck. It’s the portion you get on hand after all taxes have been paid. If you have your own work as a self-employed person, you only need to deduct the business expenses and taxes that apply to the self-employed from the amount you receive.
Determine fixed and variable costs
Fixed costs are expenses that you regularly make every month. It is almost impossible to reduce them, but it is still worthwhile to calculate them carefully. Variable costs are costs that you can manage. If you can work them, then you can try to reduce them.
Get out of the habit of spending
If your expenses far exceed your income, you should adjust your attitude toward finances. Many people often spend money on things they don’t need at all. Lunch/dinners in restaurants and buying expensive clothes or appliances are unnecessary expenses. To build your start-up capital, you must learn to live within your means. Think about what’s more important: buying another brand-name jacket or investing in your own future.
Don’t stop studying
Learning doesn’t end when we graduate from school or university. Good investors improve their skills daily. Don’t think you already know everything. Read. Learn from your managers and your subordinates. Listen carefully to others. The less you say to yourself, the better.
It should become a habit to manage your budget wisely. You will feel much more confident and relaxed when you realize that you are in control of your finances. If you work your income correctly, you will not only live a whole life without debts and various constraints, but you will also be able to multiply your capital, which will lead you to the life you dream about.