Money management is not only made for big companies or the rich but for everyone whether you make more or less. Many individuals are always in quest how to live a life so full and worry-free financially. The problem, however, is while many would want to start building their own financial stability; they do not know where to begin. Here are some tips for getting started:
- Increase your cash flow. Try to think of ways where you can make extra money outside of your stable 9-5 job. It could be a garage sale or anything that can provide you extra income. Some of us may already have two jobs or are working overtime in order to do that which could take a toll on our health. One of the creative alternative ways is to go through your monthly expense and check which expenses are permanent and which are not. Examples of permanent monthly expense are utility bills and rent, these kinds of expense may not require adjustments, but minimal if at all. However, with the non-permanent expenses, you can overhaul your list. One example is to eat out less and make affordable dinner at home instead. Shop less and shop only for things that you need. You’ll find out you will need less stuff than you normally do. This way, the money you could use for a brand new handbag can be used to start your savings for an emergency fund.
- Create an emergency savings fund. Highly recommended to start on it right away. If you keep postponing, there is a risk that you will not have anything in case you have any emergency expenses be it hospitalization or loss of a job. Start saving some cash little by little in your bank account. Most financial advisors’ best recommendation is to save up at least 3-6 months worth of your monthly income. The practical reason being is that in case of income loss it will take one person at least 3 months on average to get a new job.
- Invest in Insurances. If you don’t have it yet, consider having one. It will benefit you, in the long run. It will serve as a protection for you and your loved ones. In this fast-paced and changing world, there are now not just one or two types of insurance out there. Practically the best insurance for those who are just getting a head start in life is either to get a term or medical insurance or life insurance. Buy insurance only from legitimate brokers.
- Settle your debts and stay out of it once done. Debt cripples your financial stability. If you have any, make a settlement with your debtor about it. You will not be able to pay it overnight but at least you can create a payment scheme for a debt free, few months and years to come. Once you’re done paying your dues, stay out of it and only live within your means. It is guaranteed that debtless people sleep better all the time. Why spend the money you do not have today, which money you will need for the future expense?
- Learn to invest in securities that will benefit you in the long run. This could either be in stocks, bonds or mutual funds. Different types of securities require different risk appetites from their investors. Bonds being a low risk, low rewards security. Mutual funds are managed by fund managers so you give your money to them. They will take care of it by investing it in securities that can make you and them more money. This belongs to the medium risk category. Stocks belonging to the high risk, and high reward category is also a good choice. It takes a lot of studies though with regards to the fundamental and technical way of investing in it. Securities like these bring passive income. Something that you can live out of in your laurel years.
- Realization. This is the exciting part because you will actually step by step begin with saving that extra cash and scout for the best insurance there is. This is going to be the new beginning of your road to financial independence year. You will discover hurdles along the way. You could be tempted to spend money when you’re not supposed to. You will experience relapse but you can always get back on track again. Stick to your financial goals. Only the beginning is difficult, keep at it until it becomes a habit. When you are all too old to make active income, your passive income will take care of you. It will all be worth it in the end.