MONEY MANAGEMENT


No matter how much (or little) you know about investments, stock markets, credit cards, and insurance, your financial planning is most likely to fail if you don't have a solid understanding of your money.  The first and possibly most crucial stage in financial planning is to have a solid understanding of your finances, or your financial situation, and to be able to manage them intelligently.

So, what is your financial situation?

1) Earning and Expenses: What you earn will matter less compared to how much you spend when it comes to determining how much money you have on hand after meeting your needs and wants.  If you want to be in a better financial situation, then you have to strike a ‘balance’ between earning and spending habits. It can be used as a benchmark to plan your finances. Normally, a healthy bank balance at the end of the month indicates a trend towards a good financial position, and a zero or negative bank balance at the end of most months corresponds to a weak financial trend.

2) Assets and Liabilities: Your current and future financial situation is an indicator of the amount of valuable assets you hold. Assets, for example, investments—in gold or silver, deposits, stocks, mutual funds, art or antiques, land etc. will to add to your income (either now or in the future) or minimize expenses. Thus, assets help to strengthen your financial position. On the other hand, liabilities weaken your financial position. Debt: Something that you owe is a liability that is also eating into your assets, just like an old vehicle that needs a lot of fuel and repairs, for the work it is doing.

There are four key areas of your financial situation are: 
1. Income
2. Expenses
 3. Assets, and
4. Liabilities. 

Conclusion:  So how to do money management with these four key areas for a better financial future? 
  • Keep a Record: Keep a meticulous record of every penny coming in and going out in your diary, excel, or any place of your choice. 
  • Monthly Budget: Get into a habit of making a budget to put your money to optimum use. A budget will help you reduce liabilities, spend wisely, save, and invest. 
  • Regular Savings: for future goals, to be able to face financial emergencies and build assets.
So, it doesn’t matter how much or how little you earn, but how you manage the four key areas will determine how strong, secure, and stable you will be financially.

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