A common paradox that we are faced with nowadays is that people have similar income but differing fortunes. This is due to the fact that, even when the identical opportunities are offered, the efficacy of the opportunity is determined by how it is utilized.
An income might represent a hand-to-mouth existence or, alternatively, it can be used to generate additional revenue. This is where financial literacy and its significance enter the picture. One of the primary steps in making your money work for you is to know your finances.
Here’s a few tips on how to make your money work for you:
- Budgeting: In order to find out how much to spend, you should first know how much you intend to save. An effective budget should be one which has accurate details about both income and expenditure. A review of prior expenses would be helpful in projecting the future expenses that could come up. There should also be a reserve fund allocated towards any contingencies that are likely to come up. Having a proper budget in place goes a long way towards maximizing the value of every penny we spend.
- Eliminating Debt: The wise men always go after their debts first. When you are out of debt, your money will do what you want it to do. Hence, one of the most important steps towards savings is to prioritize debt according to its importance and paying off the debts with the highest cost at the earliest. The sooner you settle a debt, the faster you can get on the journey to savings.
- Investing for the future: The right time to begin investing is always now. Preparing a plan for future savings is a waste of current time and resources. An industrious investor always plans to spend the money that he cannot save. While expenses need to be met, they should be considered as the variable that can be altered. A savings plan is a must, even when one is in debt and income is marginal. A penny saved is a penny earned.
- Generating alternate income: The increase in cost of living has prompted many to seek additional means to supplant their fixed income. While part time employment and freelancing is often touted as effective methods for increasing your earnings, with a little bit of skill and effort, one can secure a passive income from dividends, stock market investments and royalties. A part of your savings can be put towards meaningful investments to yield high returns.
- Avoiding Hidden fees: Banks and financial institutions thrive on the fee they charge from customers for simple services. We often tend to ignore these negligible fees in our day to day activities. However, these little drops of water tend to make a mighty ocean of fee that we can ill afford to ignore. A small example is the ATM fee we pay for the privilege of withdrawing our funds. Multiple trips to the ATM’s in a month can lead to high bank charges that we can very well avoid. Similarly there are charges for maintaining accounts, funds transfer, credit card payments, maintaining minimum balance etc… If we are able to plug some of these leaks, we can end up with substantial savings over a period of time.
In today’s world, it is not easy to attain financial security just by securing an income and meeting your expenses. The aim should not be to work for money, but to make money work for you. Financial literacy is not an option anymore, it is a necessity and finding a right mentor to guide you in this journey is of paramount importance.
www.smartmoneyeducation.com will give you a new outlook on managing your money better.