All of us studied those dreadful algorithms and mathematical formulas back in our school days. Still, none of us has ever been taught by our education system - the importance of money management. The little bit of knowledge we have today is the courtesy of our parents. However, the management skills they taught us are not enough in today's actual world. If you're receiving a monthly allowance from your parents, but still living your life tightly, then it's time you evaluate your money management skills and start working on them. No need to get panic. You don't have to be a math genius to set financial goals. I have rounded up seven tips that you will find helpful on your money management journey.
1. Start your month with a budget and follow it rigidly.
We all know how much money we make a month. But when do we know how much money we spend on our groceries, dinners, movies, clothes and other stuff we usually do? Most of us don't. After spending money irresponsibly throughout the month, we hope that we don't overdraw our bank account at the end of it, but organising our money with a budget is the only way to control our spending. Making a budget is undeniably dull but think of the value that it will bring to your life. Few hours of your time and you will be surprised how much money you can save from doing those unnecessary things. A simple rule is you aim to spend 50% of your income on monthly needs and activities and use the rest either for your emergency fund or to pay off the debt to limit your non-budgeted spending.
2. Make realistic financial plans.
Are you planning for a holiday or want a big car or a big house? Nothing is impossible if you have a solid plan to achieve it. Good planning will make your path clearer. If you're planning to visit your favourite country by the end of this year, you must know how much money you will need to save each month once you have a financial plan. You wouldn't need to worry about how you will make it happen to create multiple income streams. You never know what the future holds for you.
3. Relying solely on your monthly allowance isn't an intelligent decision.
If you are still receiving allowances from your parents and do anything, it's time for you to grow up. Diversifying your income stream is a great idea, especially in these uncertain times. Find different ways to earn extra cash, whether it's only RM50 a month. There is no need for you to go big. Instead, you can start from something small. For example, you can become an online tutor, work part-time or even sell products online in different marketplaces.
4. Focus on regular savings.
If you want to become financially stable, you must commit to everyday protection. You can't just do it one month and leave it the next month. But if you're still bad at savings, you can also set an automatic transfer from your checking account to your regular account. It would be best to have enough savings in your account that will cover at least two to four months of your expenses during unfortunate times.
5. Always make conscious spending decisions.
Spending money has become hard in this digital age since everything is just a click away from us. But who would be best if you started paying close attention to every penny you spend. When you go to the grocery store, check the prices first. Or, if you're purchasing something online, stop for a minute and ask yourself, why do I need it? The small changes will help you in the long run, and you will become aware of how much money you wasted on things that you weren't even aware of.
6. Keep a spending record in a journal
Another problem in this modern world is people have stopped making writing journals. Most of us rely on our online bank statements, and as a result, we are never able to keep track of our spending. Most of the time, we unknowingly overspend and exceed our budget. Thus, it would be best to hold yourself accountable by recording everything you purchase. Save the receipts and write the amount in your journal to identify areas where you must hold yourself back.
7. Pay off the debt.
Do you know the most significant roadblock to fulfilling your dreams and achieving your goals? Debt, student loans, Wifi lines etc., all create hurdles if not paid off on time. So make a debt payoff strategy and start by adding up all the debt amount and their interest. Now try to avoid late fees on these loans as much as possible by making the minimum payment of each debt. You can also set up an automatic transfer to make sure you never miss a single charge. You will not be able to work on all of the tips mentioned right away. Your habits will change over time. But always remember that a little hard work will go a long way for you and help you stay financially healthy.
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