Managing Personal Finances The Right Way
Life is much easier when you have good financial skills, such as managing personal finances. How you spend your money impacts your credit score and the amount of debt you end up carrying. If you’re struggling with money management issues such as a living paycheck to paycheck despite making more than enough money, then here are some tips to improve your financial habits.
Create a financial-freedom account
You are a student or a working person who gets monthly income? Try setting up a bank account, and call it an account for your financial freedom. Put into that account 10% of the monthly earnings. For example, you’re a student who earns $100 / month – you should set aside a fund (let’s call it your financial-freedom account) of 10%, which is $10 / month.
This money is for investment only – to create passive cash flows to your account and you should never use this money for consuming.
This account is not used for personal spending but only for investment, you may not be able to use the principal until your retirement. By doing this, you will not be afraid of running out of money and falling into poverty.
If you are a student who has not made a lot of money, managing your money in such a way is even more important. Many of you have to borrow money to support yourself and often ask others how to make a living. The answer is you can borrow more and learn to manage the borrowed money.
Certainly, in any case, you have to do managing personal finances. Miracles will come true to you.
Balance your life with your beneficiary account
Each of us is a unified whole, you can not make money to hoard them, to save them all the time. You should balance your life with balanced cash flow. On the one hand, you save as much money as possible to invest and make more money. On the other hand, you need to put another 10% of your earnings into a “beneficiary account”.
By doing this, you will make money management more enjoyable. This account is used to pamper yourself, to provide you with the fund to do things you don’t often do in daily life. For this account, you must disburse it monthly, in the same way, that makes you feel free.
Let’s get back to the same student above. Every month, you earn $100, you deduct from that 10% ($10) into this beneficiary account. You have to spend it monthly – then, what can you use it for? Let’s say, going to cafes with your friends, buying your favorite items, going to the movies, eating out, buying gifts to your girlfriend, and so on.
With your beneficiary and financial-freedom accounts present, you should set your money in the following accounts:
- 55% for compulsory accounts and necessities (Rent, utilities, groceries, etc)
- 10% for long term savings accounts
- 10% on your education and study account (buying books, notebooks, documents, etc)
- 5% of your giving account
You may change some of the above funds to suit your spending needs or merge the two funds into one. However, the application of the correct principle will bring you unexpected results.
Manage your money now
Right now, whether you have a big fortune or nothing in your hands doesn’t matter. It is important that you immediately begin managing the money you have. The wonders of money will come when you process your financial sources seriously.
Habits of managing personal finances will help your simple “money pot” become a magnet to money and bring financial freedom opportunities to your life.
Money Management Tip
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