The Ultimate Guide to Personal Finance Management

Each one of us has different opinions when it comes to the value of money. Some say it is the ‘be-all and end-all’ of life, while others think money has no bearing on their happiness. Money does matter, despite how you value it in life. Because at the end of the day, money is what you need to take care of all your basic needs and other necessities in life, including clothing, food, and shelter.

There will be times when you make mistakes with money, leading to financially uncomfortable situations. You may spend more money shopping than you had intended, or neglect to save money for a rainy day or your retirement. Whatever the case may be, it puts you in a precarious position where you find yourself having serious money problems. You feel stressed, uneasy, and unsure of how to get out of your troubles-all of which teaches you, in a hard way, the real importance of money.

Many people might think that having more money is the key to happiness and a balanced life. But, the actual key to financial stability and happiness in life is knowing how to manage whatever money you have. Therefore, if you want to enjoy financial freedom you must know how to manage your money. Remember, a wise person should have money in their head, not their heart.

To help you avoid money issues, we have put together a few money managing tips that can be followed to improve your finances. Read each tip and see how you can apply them to create better money habits.

1. Save your money

If you have less than $1,000 in your savings account, that is a major problem. Unfortunately, most people do not even have a savings account, which means they are only spending the money they earn. This means you are living paycheck-to-paycheck, so any unforeseen expense can put you in a dire situation. You should start having long-term plans in mind, instead of just being concerned about getting by day-to-day.

One way to start saving is to have a small percentage automatically deducted from your check into your savings account every month. The notion behind this is, “if you do not see it, you will not spend it”. This helps you get used to living on a certain amount of income, while you are saving money at the same time. You are basically living below your means while securing your financial future at the same time.

2. Learn to live below your means

Just because you start making more money, it is not the time for you to increase your spending habits. Many people make this mistake, and then find that their finances are worse than when they were earning less money. This happens because they are now spending money that they do not have because they are living above their means. This puts you in the position of having to continually chase money, instead of being able to put money aside.

You need to increase your savings, not your spending when you receive a pay increase. It is better to go without the unnecessary purchases than to worry about money at your retirement age. You do not want to struggle for financial stability at 60 years because you were careless with money at your younger ages.

3. Do not make unnecessary purchases

Most people have the bad habit of wanting to spend money on something that they want, that does not bring any real value to their life. It is better to spend money on things you need, rather than what you want, because “what you want” usually involve irrational spending. You must be rational when it comes to your finances if your desire is to build financial security.

Material things only last for so long, and they do not have much value. If you make big purchases, make sure they are part of your long-term financial plan. These types of purchases include houses, businesses, and investments. It is better to make purchases that help you earn more money, rather than waste your money.

4. Stop trying to impress people by spending money

The biggest mistake most people make is trying to impress people by showing off how much they spend on material things. The funny fact is that the people whom you are trying to impress may not even have anything to contribute in your life. You are wasting both your time and money if you choose to impress people with your purchases.

You must remember that long-term wealth is what is most important when it comes to your finances. If you do short-term valid purchases, you will find yourself experiencing financial issues more often than you anticipate. Your focus must be on continually increasing your savings, instead of ignoring its existence.

5. Start putting money into your retirement fund immediately

More than one-third of people have less than $10,000 saved in a retirement account. If this is the case, these individuals will have to work well past their retirement age, which is something most people do not want to do. In your 20s, it can be easy to forget that you will eventually want to retire as you get older, but this is the age when you should start saving money for this later stage of your life. Think about the compound interest that builds over time, if you start a retirement fund in your early 20s. If you consistently put money into this account for forty years, you should have well over a million dollars by the time you reach your 60s. Therefore, it is important that you begin saving money as soon as possible. The longer you wait to do so, the harder it will be to scrape up the money you need to comfortably retire.

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6. Use the stock market to your advantage

Most people fear to invest in the stock market because they are afraid of taking risks that they were taught to avoid. The problem with fearing the stock market is that you are minimizing your opportunity to secure wealth. Even if you do not want to start with huge investments, you can start small to learn how the stock market works. The sooner you learn how it works, the sooner you can begin investing in stock options that fit your financial strategy. Your goal does not have to be focused on becoming a millionaire through stock investments. But you should use the stock market to earn good side-income, that goes towards your savings and other investments.

7. Invest more money than you spend

The key to earning real financial security is to constantly seek out investments that help you generate more and more money. If you become complacent, you will soon find that your earning potential has reached a point of stagnation. If you want to earn real money, that leads to living a comfortable life, you must invest in other opportunities that help you generate new income.

8. You must invest in yourself

One of the most important investments you can make is the investment in yourself. By continually improving your knowledge about finances, investments, and wealth assets, you will position yourself to live a life of prosperity. The people who are struggling to gain control of their finances are the ones who do not invest in their financial education. Therefore, they have no clue about what needs to be done to secure financial wealth. Learn the basics first, and then explore more complicated financial strategies, once you gain a complete understanding of the simple fundamentals.

9. Know what your ideal financial picture looks like

One of the most important factors for your financial future is knowing what that future should look like. It is not enough to just want a lot of money. You need to know the exact amount of money you want to attain so that you can create strategies that help you reach your end-goal. When you have a clear picture of what you want, you become more focused on ensuring that your financial future comes into fruition.

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10. Stop worrying and start doing

If you let fear control your thoughts, you will make it impossible to move forward on taking the necessary actions to achieve the financial position you desire being in. You cannot create wealth when you have a doubter’s mindset. Wealthy individuals do not let things such as fear and doubt, interfere with their ability to make money.

11. Money is important but it is not everything

Money is important for taking care of your necessities and living comfortably, but it does not make you as a person. Money is just a tool that allows you to experience life on a different level, depending on how much of it you have. Yes, you should aim for making as much money as possible, but you should not chase money out of greed. Greed will soon destroy you if you allow it to get out of hand. Therefore, use money as the resource it is, and not as a means for validation.

12. Do not let money make you

If your happiness is attached to how much money you have, you will only make yourself miserable because you will always want more money. People who allow money to define them spend a lot of money just to impress people. This is not the smart thing to do, especially since you are only wasting money in the long-run. Focus on making yourself happy and only view money as a means to achieve financial freedom.