Ever since we were kids, we were taught to develop skills and graduate from schools that would help us earn more money. But regardless of whether you have a little or a lot, how you manage your finances is what’s important.
Money management does take some skills and let’s face it, we’re not all finance geniuses. However, there are certain basic money lessons every man should know and we will discuss them in this article.
By mastering these money lessons, you will be able to better understand your finances and how to manage them.
Don’t be Intimidated by Money
Too many people dislike talking about finances because they are intimidated by money. They somehow fear it. This probably has to do with the fact that no one teaches us money management skills at school or when we enter adulthood.
But this fear is a barrier that stands in your way of mastering money management. After all, it is you who controls your personal finances, not the other way around.
It has never been easier to gain access to financial information and educate yourself on the matter.
Always Have a Financial Goal
It’s hard to start saving when you don’t have a clear goal in mind. You’ll probably end up putting some money on the side from this month’s paycheck, a little bit less from the next one, and you’ll completely forget about it in two months.
Consistency is key and this is why financial goals are essential. If you’re thinking about saving for retirement or buying a home or whatever you consider as your top priority, you need to set clear goals before you start. This is the first step towards saving money because it will motivate you to endure month after month, year after year. Keep in mind that which you’re striving to achieve. But do remember that your goals need to be realistic and achievable and make sure that have enough time to achieve them.
Everyone Can Afford to Save
We either don’t save at all or we save too little each month for it to bear any significance. The most common mistake we make is that we think we don’t earn enough to save. But here’s the harsh reality: we never really do. According to sources, household spending in many countries is higher than household income.
No matter how much you earn, your living expenses and spending habits will grow, and so you will need more money for that and there will be less money for savings. The key is to start saving anyway, with the little you’ve got. Set aside a small portion of your income but be careful not to put too big of a strain on your wallet. The sooner you start saving, the more time there’ll be for your money to grow thanks to compounding interest. So if you’re saving for your retirement, the earlier you start, the more money there will be for your comfortable golden days.
Emergency Funds Are a Necessity
How many people do you know that have a separate little fund designated for emergencies? Not many, we bet. In fact, in America, most people wouldn’t be able to cover a $400 expense in cases of emergency. That’s is pretty devastating.
The sad truth is that we never know when might something like that happen to us. You might fall ill or get fired or face a different kind of emergency that you won’t be able to cover the bill without borrowing money or selling something.
It’s best if you set up an emergency fund, separate from your retirement savings or your down payment for a new house. We know it’s hard but not impossible.
Budgeting is Essential
Financial experts keep emphasizing how important budgeting is for every adult individual. No matter how much you earn, if you don’t create a budget and stick to it, you’re not likely to reach your financial goals. In fact, the more you earn, the more you’ll spend, and, without a spending system in place, you will struggle to make ends meet even if you do earn a solid income.
Whether you have a debt to pay off or you want to save money for a specific financial goal, you need to set a spending limit. But contrary to what some people may think, creating a budget is not difficult. In fact, that’s the easiest part. However, it’s the second part of budgeting that requires constant effort. Sticking to your budget is quite difficult, we admit, but after a few months of doing it, you’ll get used to spending less and living within your means.
However, make sure that your budget is realistic. If you need help with your budget, there is the well-known 50/30/20 rule created by an expert that you could try or simply download one of the many available budgeting apps.
Investing Is For Everyone
Investing can sound pretty scary and intimidating as well. But becoming an investor is simpler than you think. If you thought you need vast amounts of money to invest, think again.
Investing is for everyone, actually. Even if you have a modest income, you can set aside $20 dollars a month to invest in something.
Investing can help you secure a better future. It can help you live comfortably in your retirement. As much as we don’t want to think about it, we will stop receiving monthly income at some point, and clever investing can make those days a lot easier.
Don’t Use Credit to Buy Things You Don’t Need
If only we understood how credit works before we run up huge debts on our credit cards… Too many people use credit cards to buy things they can’t afford and more importantly that they don’t need. They end up with thousands of dollars of debt and the interest rate adds an additional burden.
Young people think of credit cards as something they’ll have to pay later while they can enjoy their purchase (expensive clothes, travel, etc) in the present. But in reality, people rarely pay it back every month. Meanwhile, the interest rate is accrued on a daily basis and your debt continues to grow long after you posted a photo of your new expensive shoes on Instagram. It continues to grow even though you haven’t made any new purchases. The debt accumulates and you end up with an exorbitant amount of credit card debt that you can’t pay off.
Understand how credit cards work before you use it to buy things you don’t need. Unless you absolutely have no other choice, don’t use them at all! Your future self will thank you.
Unfortunately, there are a lot of money-related things no one teaches us before we enter adulthood. We have to figure out those things on our own. However, we truly live in the golden age of information. It would be silly to blame someone else for our lack of interest when there’s so much information available.
Thanks to numerous sources online, you don’t have to wait for someone to explain things to you. There are so many finance-related magazines, online publications, and blogs that tackle important topics such as budgeting, investing and tax relief. It’s impossible to stay uninformed, unless you really want to. So gain control of your money and start learning.
By Rebecca Brown
I’m Rebecca, a translator and avid traveler, a book worm and horror flick enthusiast. My job has given me the amazing opportunity to travel to dozens of countries around the world, and writing on Rough Draft gives me a chance to try to showcase some of them.