How to Manage Your Money Effectively? | In In Financial Fitness | By By moneyview

Managing your money effectively is the foundation of personal financial success. Yet, in spite of abundant skills and large pays, we often end up waiting for the next check to hit our bank account. Some of us carry more debt than we should, while others keep deferring that big dream vacation or purchase for “when I have some spare cash.” The basics of effective money management are knowing how and from where your money is coming, where it needs to go, where it actually goes, and how it can do better. Here are some tested tips to help you create and implement a practical and effective money plan.

Claim Control With A Budget

Most people miss out on this basic step of recording income and expenses and having a plan for things like savings, big purchases, investments and emergencies. To get started, you have to list out your recurrent expenses, bills, debts, and taxes. Tracking all of this effectively is possible with the help of a budget. You can use a spreadsheet or a sticky note, but without it, you are really groping in the dark. Write down every expense and financial goal against your income and time, and you have a start. Your budget commits you to a course of action with vision and purpose.

Understand What You Want

The greater your clarity about the kind of life you want to live and the reason for spending on the things you spend on, the easier it becomes to come by money to achieve those things. This beautifully strange aspect of the law of attraction demands we start digging deeper, detailing not only the future we are building but also the motives for doing so. As you do this, you will find yourself eliminating wasteful consumption, enhancing your productivity, and investing in yourself. Most of us can identify instances where we realized this was not what we wanted, not what we wanted at all.

Know The Rules

Your income should be able to pay for rent, utilities, food, EMIs and debt repayment, daily expenses, some emergency cash, some recreation and some savings. If it is not, you need to review either your income or the cost of your lifestyle. You might be able to do without few of the things for a while as you let a budget guide you to a position of advantage. When you get paid, clear all payments, and factor out payments that have to be made later. This way you will have a clear idea of how much money you have for your daily expenses, savings, and emergencies. If your tax belt needs to be tightened a notch, remember to do it as soon as you feel the slack, not in the last months of the year.

Studied Investments

Once you have an adequate emergency fund and some savings, it is time to invest. Investment best practices shared by wealth creation gurus like Warren Buffet and Carl Icahn are freely available on the internet. Make sure you cover the three places you should be putting your money – in stocks, in realty, and in owning businesses. Businesses can be owned by lending capital, or by putting out your skills and time as sweat equity. Gold and money instruments are good options too, depending on your appetite for risk. Anything that depreciates (the SUV, the DSLR) is not an investment unless it is making you more money than it costs over a reasonable period of time. In today’s electronically traded world, you can start as big or as small as you like.

Managing money effectively is a skillset, and skillsets can be acquired. Start with the steps listed above and you are well on your way. We would love to hear your money management stories. Do leave a comment or question if you have one, and you will hear from us.

Subhorup Dasgupta is a Hyderabad-based blogger and artist. He writes about responsible living at his blog, Subho’s Jejune Diet.