Personal finance is just that, completely personal. Everyone's spending activities, spending habits, and money priorities are different. However, the foundation for building wealth is always the same and never changes: Spend less than you earn, use the rest to save, and invest.
Here are a few ways you can start building an effective money management plan.
1. Change the way you think about saving
Often, after deducting your monthly expenses and taxes, you realize that maybe now is not the time to start saving because the amount left may be too little. However, did you know that if you continue to spend like this, you will never know when you can start a savings plan for yourself?
So we need a small change here. Instead of using all of your monthly earnings, set aside a small amount to start saving, then consider spending the rest. At first glance, these two methods are quite similar, but in terms of effectiveness, they are completely different.
You should also spend wisely to save money. As the use of discount codes, coupons when buying on websites, e-commerce sites, will partly help you save a cost when buying.
2. Have a specific goal
What to do with the accumulated money is a question that you should ask yourself before starting your plan. Just like an athlete trains day and night to win a championship at the Olympics, it can be hard to save money effectively when you don't know what you're going to do with that money.
Financial experts recommend that we have a 5-year plan, which specifies what goals you want to achieve during that time and what you need to do to get there.
And no matter what your goal is, buy a house, buy a car, travel, or save for old age, as long as that goal is always in your head, you will have more motivation to achieve it. its goal.
3. Start saving now
If you're in your 20s or 30s, retirement may seem like a long way off, and saving for then doesn't seem like a priority right now.
This is also quite understandable when you still have to spend a large amount of money on parties, weddings, house payments and use the rest for the necessities of youth such as traveling abroad Go out or shop for some trendy items.
But unfortunately, the later you save, the more money you need to spend. And vice versa when you save early, you will understand the power of "compound interest".
Let's try with a simple example like this, let's say you are 30 years old and every month you transfer 50 USD into your savings account with 7% interest, after 20 years the amount you receive will be up to $56,000.
Meanwhile, if you waited until age 40 to start saving, you would have to spend $110 a month to reach that number by age 50.
If you start your plan from the age of 20, the number that you have to spend every month will be much lower.
4. Know your income and expenditure
Many times we wonder that we have saved as much as we can, but why the amount of money saved is not "measured" compared to the number we calculated. The reason may be that we have not managed our money effectively.
Without knowing the transactions on your bank account, you won't know exactly how much you need to be able to execute your plan, and you won't know when to stop shopping. again. Practice becoming the “financial director” of your household.
5. Stay away from debt
There are probably few of us who have never been in debt, more or less. One thing that cannot be ignored when starting a savings plan is to review and "pay off" all outstanding debts.
The sooner the better because as long as you are not out of that cycle of debt, you will hardly be able to devote all your attention to the other plan. You will always need a small “contingency fund” for unexpected work such as car breakdown and illness.
6. Increase income
Looking for ways to increase our income, this is probably the first thing we think about, but it's not always possible. However, this does not guarantee an increase in savings because as income increases, our way of life changes as well. In addition to getting a raise from your main job, there are a few other ways you can improve your income.
First, you can earn extra money by doing a second job, which can be a part-time job that you love or that is related to your current job. Not only will it help increase your income, but you will also feel more productive using your time doing what you love.
A friend of mine is currently in charge of engineering for a private company, however, he is also a photography enthusiast and his photos are also loved by many people. Therefore, he often takes advantage of the weekend to take photos of the service to earn extra income.
Another idea is that you can look for outside investment opportunities (help from financial experts is recommended). The more diverse your income sources, the more likely your savings plan will be successful.
7. Using consulting services
No matter what, sometimes you will still need the advice of financial advisors because life is always full of surprises ahead. You may be a serious follower of these 6 things, but one incident can put all your efforts in vain.
Take for example the 2008 global financial crisis. Or a wrong decision in the heat of the moment can lead to unintended consequences. So an experienced professional will help you see the big picture as well as the right advice in any situation.
Effective money management will help you save and accumulate your money in the most optimal way. The above article has mentioned 7 ways to effectively manage money, hope it will be useful to you.