Basics of Money Management
Money plays an important part in our every day lives and making the most of what we have will help us live a life free of financial pressures. By learning some basic rules, you can make life easier for yourself and for those who depend on you. Here are my basic rules.
Rule one. Don’t borrow money for consumable goods. What are consumable goods? They are stuff that lose value over time. Stuff you want but can live without. Examples are electronics, subscriptions to magazines, auto mobiles etc.
Rule two. Live within your means. In other words, spend less than you make. I know that may sound hard if you are on a tight budget but to just take easy credit when it is available to you is simply inviting financial disaster.
Rule three. Become financially educated. This can only be done by reading all you can about the various investment options available to you. There is really no excuse for not being kept up to date with all of the financial news because there is so much information on financial matters available on and offline.
Rule four. Diversify. A mistake that some investors have made in the past is to put all of their eggs in the one basket only to find that the company they invested their money in went bellyup. Prudent investors diversify. That is spread their money around in various companies to minimize their risk.
Rule five. Keep good company. There are people about who have bad attitudes toward financial planning and money in general and if you spend too much time with these people there attitudes can affect your thinking.
Rule six. Take responsibility for your own finances. Some people will ask others for advice just so that they have someone to blame if things do not work out for them. A financial advisor will tell you to do this or that but at the end of the day it is your money and you are the one who reaps the rewards when the markets are up or takes a hit when they are down.
Rule seven. Take a long-term view of your investments. Investing your savings is a long-term game and in order to take advantage of the gains in the markets you have to take a hit occasionally which means not panicking when the markets are going down.
Rule eight. Keep the big picture in mind. In other words have a target or goal in mind. Are you saving for a house deposit or your retirement?