Life is a lot easier when you have excellent money management skills. If you are living in debts and from a paycheck to paycheck, here are the essential money management skills that can save you.
Whether you like it or not, today the money controls almost everything. It controls how you live to world politics. So, learning how to control money, AKA money management can always come in handy in your life.
Here are some FAQs about money management
Money management is the process of how you budget, save, invest, and spend your money.
In other words, money management is how you control your incomes and expenses. You don’t need to have a PhD in money management to understand the process. It is all about common sense.
In this blog post, we are going to discuss some of the excellent money management skills that you can learn from billionaires.
Here is the list of money management skills that we are going to discuss in this blog post.
– Understanding the difference between the price and value
– Budgeting your income and expenses
– Creating practical financial goals
– Not going into debt, unless you can profit it later
– Learning how to save your money
– Learning how to invest and grow your money
You can have better control over your finances by developing the money management skills that we are going to discuss in this article. All it takes is a bit of more commitment from your end.
Please go through the list of the money management skills that we have listed below, and try to adjust your financials accordingly.
The goal of having a proper money management strategy is to ensure that you always have enough money for the things that you need and things that are important to you.
Also, a proper money management plan can help you to find your way out of the debts that you are in. Most importantly, if you do it right, you will be able to retire early, and live your life to it’s fullest.
50 20 30 budget rule is a popular theory that people use in their money management strategies. It has four steps.
– Step one: calculate your after-tax income
– Step two: limit your needs to 50% of your after-tax income
(i.e., Housing, groceries, rentals, utilities, insurance, etc.)
– Step three: limit your “wants” to 30%
(i.e., shopping, hobbies, or dining outs, etc.)
– Step four: spend 20%on savings and debt repayments
When you study carefully, the reason for rich people to be rich and stay rich boils down to one good reason. That’s their excellent money management skills.
We know some amazingly talented people who are penniless. Also, we know those who won substantial lottery money and lost that wealth right away. That means with knowing how to manage your money, you can’t be rich and stay rich!
In this article, we are going to discuss the essential money management skills that you can learn from billionaires. These skills will change the way you think about money and use money.
Here are some tips on how to save money on a low income.
– Start a side hustle to make more money.
– Keep your budget lean
– Work out the high-interest loans first
– Develop a skill to get a better paying job
Money management skills from billionaires
When it comes to money management, many people idolize people like Warren Buffett or Bill Gates.
Obviously, they are incredibly successful and brilliant in the way they run their businesses. So, let us see what you can learn from them about how to manage your money.
1. Understand the difference between the price and the value
We like to buy a cool brand of shoes, clothes, or gadgets. There is nothing wrong with this. However, after you start practicing money management, you must have to understand the real value of such products to you.
I mean, look around your house. You will see a bunch of stuff that you had never used or used for just one or two times. Those do not worth the money you spent. You could have used that money for something, which is more useful.
Here is a fun activity:
Go around your house, and list down the things that you are not using anymore. This can include tools, decorations, clothes, or anything. Then calculate how much you had spent on those things.
Money is an exchange of value. So, before you buy something, you need to question whether that product can create a value similar to or better than the price you spent. Alternatively, you have to think about what you can do better with that money.
2. Budget your expenses
Budgeting is one of the essential steps in creating a proper money management plan. It can help you to foresee your expenses and save you from spending on unnecessary stuff.
Also, once you see how much you are spending on different things, it is easier for you to make adjustments by cutting down the expenses on individual items, and allocating more for things that make your life easy.
When you start your money management plan and start budgeting, you will realize that there are two types of costs; The fixed expenses are the rentals and loan repayments, etc. The variable costs depend on your monthly consumptions like food, electricity, entertainment, or fuel.
If you want to make any adjustments for your budget, it is easier to start from the variable expenses. For example, you can lower your entertainment budget easily, and allocate that money for an investment or increase your monthly loan repayment.
3. Creating practical financial goals
We love to set goals. Setting money goals like “I want to be a millionaire in two years” can be fascinating to think of. However, in reality, some of these goals are not achievable at all. Also, if setting unachievable goals can actually slow you down from reaching anything.
So, when you set goals, try to think of practical and measurable goals, that you can achieve in small time frames. You can always measure your success by setting achievable and straightforward goals.
If you want to be a millionaire, rather than setting that as your only goal, try to come up with a pathway to do that.
For example, think of creating goals like below.
- Creating a list of unnecessary expenses by next Sunday
- Completely cut down the unnecessary expenses in two months
- Take up a parttime job, a freelancing job by the end of next month
- Start saving 40% of the monthly income in four months
- Start researching and learn about investment opportunities within three months
- Select an investment opportunity and start investing by the end of this year
When you set such small chunks of measurable and achievable goals, it is easier for you to followup and adjusts your plans. So, when you set financial goals in your money management strategies, make sure to follow this rule.
4. Don’t go into debt unless you’ll profit later
Managing debts is a critical part of a money management plan.
Debts are more like fire
If you use it right, it can be a great servant creating wealth for you. However, if you don’t manage your debts right, it can be a bad master. That’s why you need to pay special attention to debts in your money management plan.
You have to be scared to get into debt unless you are borrowing a capital investment to grow and make profits. If you have a viable plan to grow and make profits from the debts that you get into, don’t be scared at all.
According to the Wealth Advisor, “Don’t go into debt just to buy a bigger and better widescreen TV.”
5. Learn how to save your money
Starting to save your money is a perfect way to start your money management strategy. You can start saving by building an emergency fund. Next, commit more to cut down your unnecessary expenses and allocate more money for saving every month.
You will feel a lot safer and satisfied when you start seeing that your savings account is getting fat. Savings is the first steps of gaining your financial freedom.
If you don’t have a good income to start saving, think of the ways to earn more. For example, there are plenty of ways to make money online by starting an online business, freelancing, and many more.
6. Learn to invest and grow your money
Usually, the salaries or the paychecks won’t let you become rich.
The paychecks and salaries are just there to let you make a living. If you want to gain your financial freedom by building proper money management skills, you need to learn how to invest and grow your money.
When we say investments, don’t think that you have to become the wolf of the wall street. Investing is not all about investing in stocks and real estate.
While you can research for such investment opportunities, think of the other methods to invest your time and money too. For example, you can easily start an online business by investing a little bit of money on the side.
Also, you can invest your money and time to learn a new skill that can help you to grow your money even faster. For example, I am an electrical engineer by profession, but I had started learning digital marketing to start my online store to make more money on the side.
Money management skills start with common sense
Money management skills are not rocket science. It is all about having a better common sense in your life. Whether we like it or not, money is caple of controlling many aspects of our lives. So, you have to ensure that you have enough money for the things that you need.
Money management can help you to control your income and expenses to improve your financial status. It can make you rich! All you have to do is, creating a proper money management plan and commit to that plan.
In this blog post, we have shared the essential money management skills that you need to learn right away. Did we miss anything? Please share that on the comments!