When you start managing your finances, you'll have a better perspective of where and how you're spending your money. This can help you keep within your budget, and even increase your savings. With good personal finance management, you'll also learn to control your money so you can achieve your financial goals.
The rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must-have or must-do. The remaining half should be split up between 20% savings and debt repayment and 30% to everything else that you might want.
Set the right financial goals
If you are getting serious about your money, then setting goals is one of the most important money management tips you can use! Creating financial goals will help you stay focused and motivated towards where you want to be financially.
Personal finance doesn't have to be complicated. In fact, there is a “golden rule” that everyone should follow, and simply by adhering to it, you'll be on a path to financial freedom. The Golden Rule is this: Don't spend more than you earn, and focus on what you can KEEP!
Golden Rule #1: Don't spend more than you make
Basic money management starts with this rule. If you always spend less than you earn, your finances will always be in good shape. Understand the difference between needs and wants, live within your income, and don't take on any unnecessary debt. It's really that simple.
The five principles are consistency, timeliness, justification, documentation, and certification.
Money management: why it's important
Basic money management is about meeting your family's everyday expenses, handling unexpected bills and saving for the future. It can put you in control of your money, which helps you avoid stress and feel more secure.
One common strategy for saving money is called the 50-30-20 rule: Spend 50 percent on needs, 30 percent on wants and put 20 percent toward savings and paying off debt.
Why Do We Need Money? Money can't buy happiness, but it can buy security and safety for you and your loved ones. Human beings need money to pay for all the things that make your life possible, such as shelter, food, healthcare bills, and a good education.
By generating enough cash, a business can meet its everyday business needs and avoid taking on debt. That way, the business has more control over its activities. In a situation in which a business has to take on debt to meet its expenses, it is likely that its debtors will have a say in how the business is run.
Finances are one of the main reasons that students drop out of college. By practicing proper money management techniques now, students can feel confident about their ability to manage finances into their adult life, save money and avoid debt down the road. College is also when a lot of people start to build credit.
The Rule of 72 is a calculation that estimates the number of years it takes to double your money at a specified rate of return. If, for example, your account earns 4 percent, divide 72 by 4 to get the number of years it will take for your money to double.
Money is the medium used by people to buy required goods and services. It is used as the source to fulfill basic needs and is also a source of comfort in life. Money is the most important source to live a healthy and prosperous life; however, it cannot be compared with the significance of love and care.
The more you matter in history and the grand scheme of things, the more meaningful and purposeful your life. Money can't give you purpose -- at least not one that holds worth. The only use of money is for power, but true power lies in how you can affect and change the minds and actions of other people.