To become financially free, it's not just about having a solid investment program laid out for you. Investing is all but one part of the many criteria towards become financially free. An important criteria many of us tend to overlook is having a proper money managing plan. Without setting financial goals and proper money management, successful investment returns will only end up being spent away or spent on the wrong things.
It's not that difficult (really) and you don't need to be a genius to manage your money. All you need is to allocate some of your time and put in some effort to start your own financial plans and goal. Here's something I found from from BankingInfo that I feel is worth a read and hopefully kickstart your own money managing plan!
Taken from BankingInfo:
Whether you earn a little or a lot, it’s always wise to start budget and plan your finances smartly. Common mistakes that most people would make when it comes to money is getting too deep in debt, paying bills late, and not knowing how to save for the future. You can avoid making these mistakes by always keeping track of where your money goes and knowing what you can spend on.
Here are some steps that you can use for managing your money wisely
STEP 1 - SET YOUR FINANCIAL GOALS
Financial goals reflect things you want to do with your money within a certain period of time. Setting these goals will help you understand the value of money and encourage prudent spending. Be sure to know how long you should plan for each goal.
Are they short, medium or long term goals? Which one of the following are your financial goals?
Buying a house- Buying a car
- Starting a family
- Child’s education plan
- Traveling
- Medical and Health Insurance
- Saving for retirement
STEP 2 - KNOW WHERE YOUR MONEY GOES TO
After setting your goals, start developing a spending plan so that it’s easier to achieve your goals. Remember that your aim is not to cut your budget but to note the direction of your spending.
With this you will know:
- Where and how you spend your money
- How much you owe monthly
- How much is left at the end of the month
STEP 3 - ASSESS YOUR SPENDING HABITS
If you find that you have nothing left at the end of the month, it’s time to assess your spending habits. Look through your list of expenses and determine if they are a necessity or luxury item.
Look out for the following warning signals of bad spending habits that may lead to real money problems:
- You use your savings to pay current bills
- You take new loans to pay for old ones
- You owe more than you earn
- You buy on impulse even when you know you cannot afford it
STEP 4 - WRITE DOWN YOUR SPENDING PLAN
A spending plan can help you manage your finances. You can also target areas where spending is out of control and also set a clear path for saving.
You can start making your own spending plan by using this simple guide:
- Establish your monthly total income
- Add up your total expenses including fixed monthly bills, loan repayments, rentals and daily living expenses, etc
- Put aside a fixed sum of money to meet emergencies or seasonal expenses (e.g. school fees, road tax, insurance renewals)
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