There’s so much you want to accomplish in your lifetime. Undeniably most of your dreams cost money. The key to fulfilling them is to learn to manage money.
Once you learn the basics of saving, budgeting and investing money, you will undoubtedly achieve your goals.
In today’s economy with skyrocketing energy and food costs, and rising unemployment rates, managing money can be an arduous task, but surely not an impossible one.
How do you go about it?
Here are the top six tips to save more money and invest better.
1. Making a Budget is Priority
- Regular and one time spends
- Each and every expense, even discretionary ones
If your budget includes both these elements, you will probably never be out of money. You can control your finances just by budgeting. This way you can prioritize your spending and allocate your money to things that are of utmost importance to you.
Farnoosh Torabi, financial author and expert, stresses on the importance of paying attention to the little things that add up to a big amount.
Of course you want it all, but prioritize what you need first and what can wait for later, and spend accordingly.
2. Maintain an Expense Record
You need to look more closely at where your money is going and where exactly you can cut corners.
Sandwiches, magazines or those coffees at Starbucks – everything counts. Regardless of how small the amount you spend, it all adds up to a bigger number. Hence, you need to keep a track of it.
The best way out is to maintain an expense record. Try making a note of what you spend for at least a month, including every purchase. If you can do it for longer, you’ll get a clearer picture of exactly what you spend your money on and how you can cut costs there.
In addition to this, you can divide your expenses into two: regular and irregular. This will help you have greater control over your monthly expenditures.
3. Clearing off the Debt
If you’re in debt or are struggling financially, one of the easiest ways to cope with it is to crawl into your shell and ignore your bank statements and payment demands. But this, by no means, is going to make things easier.
Instead, face the problem. Know what you need to deal with. Once you are clear on this, you will be fully aware of the next step.
Dave Ramsey, an American financial author, advocates getting out of debt with the debt snowball plan. By this he means, it’s wise to keep your debt as low as you can without crippling your business. And keep your personal debt nonexistent, if possible. These are some of the top tips that he offers:
- Stop adding on to your debt
- Set up automatic bill payments
- Organize your debts
- Pay attention to one debt at a time
Rachel Cruze, Dave Ramsey’s daughter states that by setting up an emergency fund, you will be able to stay focused on paying off debt when emergencies pop up.
4. Insurance is the First Step
One of the basic steps for your and your family’s future is insurance.
There are various types of insurance, but the focus needs to be on the most important ones such as health insurance, disability insurance, life insurance, auto insurance, and homeowners insurance.
5. Establish Saving Goals and Save Regularly No Matter What
Look at yourself in the mirror and say this – by the end of this month, you will be able to buy your dream car from your savings, one that you have been desperately waiting for all this while.
How does that make you feel?
Excited, of course!
This, however, will not become a reality until you wise up and start saving money to achieve your desired goal.
The point to bear in mind while saving money is to focus on what you will be able to do once you have successfully built a considerable corpus, rather than only thinking about setting money aside.
Award-winning journalist and savings expert Cameron Huddleston emphasizes on the importance of setting goals when saving money.
So, you want to save money on a regular basis but don’t know how?
Enter savings account.
Set up a standing instruction, so that every month the money gets transferred to your savings account directly without you worrying about it. And don’t wait till the end of month for this.
There are three benefits of doing so:
- The money gets transferred into your savings account as soon as you’re paid your salary.
- The amount you save increases if you get a pay raise.
- You get a competitive rate of return on your savings.
6. Evaluating Your Risk Tolerance
Risks play an important role in making all investment decisions.
The golden rule is, the higher the returns from a particular investment, the greater will be the risk involved.
Some of the most important factors that can help you determine your risk tolerance are:
- Financial goals
- Liquid Cash
- Insurance Cover
If you want to make wise investment decisions, you need to evaluate your risk tolerance before venturing into anything.
One of the hardest things about managing and saving money is the very first step – getting started. It can be extremely difficult to use your savings prudently in order to pursue your financial goals. The above tips will help you develop a realistic saving and investment plan. Moreover, it will help you understand money related matters in a much better way. Follow them and nothing can stop you from achieving financial success.