A dollar saved is a dollar earned. Count your pennies. Earn more, spend less. You’ve undoubtedly heard one, or all of these cliches. You’ve probably even heard a lot more. While they are all true in theory, they are worthless in practice. This is because money management and personal finance is an area that a leave a lot of people bewildered and confused.
Here are several ways to become financially smarter with your money.
“Don’t tell me what you value. Show me your budget, and I’ll tell you what you value.” – Joe Biden
Evaluate what items you’ve actually purchased for the past 6 months. For example, you may plan to save money to pay off your mortgage. Recent receipts, however, reveal the truth: you’ve been ordering out from too many restaurants. Budgets are not personal/financial goals – they are guides towards financial wealth.
2. Admit Your Faults
Every single one of us has flaws – especially when it comes to money. We as humans tend to turn a blind eye to our flaws, faults and mistakes that happen. Often deceiving ourselves into believing that the mess we’re in is not our fault.
That’s why a large component of financial intelligence is recognizing when a problem is afoot. Ignoring financial problems will not make them go away, and will only make things worse for yourself.
3. Conquer Debt
Managing debt and managing financial savings work together like two peas in a pod. Debts with stellar interest rates deserve highest priority, and must be paid down before the emergency fund is built. Because many people mistakenly build the emergency fund first, their debt increases each month – making it more difficult for themselves to escape it.
4. What Is Money, Anyway?
“It’s not how much money you make, but how much money you keep, how hard it works for you, and how many generations you keep it for.” – Robert Kiyosaki
This means researching all that you can about money. It will help you understand the “jargon” of this world, what’s happening in the economy, as well as making money management much less scary. You could research about basic percentage calculations, how to calculate returns on stock investments, how stock options (such as calls and puts) really work, why precious metals may be more valuable than the American dollar, or why Social Security has a growing inequality problem.
5. Know Where Your Money Will Be
Figuring out where your money will be, and where to put it, helps you control it; now and in the future. This includes cash you have on hand, and bank accounts including credit cards. Read Credit Card Reviews and compare accounts to know which one would be best for you. Take all the money you make and assign long-term destinations: “This $10 in my pocket will be in a high-interest savings account for the next five years.”
6. Learn To Invest
This is called value investing, made popular by legendary financial wizards Warren Buffett and Charlie Munger. This is because, instead of selling those shares, they are reinvested into the stock; these reinvestment gather compound interest. Although many people agree that stock investment is risky, investing in index mutual funds and dividend ETFs are generally less riskier than day traders would have you believe.
“Formal education will make you a living; self-education will make you a fortune.” – Jim Rohn
Saving money is vital, these days more than ever. Educating yourself about how to manage money more successfully, will not only help you make more money work for you, but will help you keep the money that you “employ.”