4 Proven methods to master your finances
Actively managing the spending and saving of your money is known as personal finance, a fundamental discipline that provides control, peace of mind, and financial freedom to your life.
But how can you manage your money correctly if no one has taught you? Below are five tips for you to master your finances and start applying them today.
Live with less than what you earn (and invest the rest)
This is a simple tip, but that doesn’t mean it’s easy. You can make it. It’s about having a conscious relationship with your money and spending less than you earn from your income so that you always have room to save and invest.
For example, if you earn $7,000 a month, you should try to live for $6,000 a month. This way, you will have $1,000 to save and invest in the future, depending on what financial goal you have.
I recommend that you set your goals first.”How is that? It means that every time you receive your salary, the first thing you should do is separate the amount you have planned for your savings. You can learn more about this concept in the book. The Richest Man in Babylon, by George S. Clason.
Have a record of expenses
An expense record is a log of each payment or purchase you make during the month, classifying said expenses into different categories. Its objective is to be able to measure, control, and improve your behavior with money.
It is important because it lets you know where to allocate every cent you spend. From a philosophical point of view, it helps you discover if your spending is aligned with your values. If the things you buy are things that add value to your life,
By being clear about your behavior with money, you can put together a budget, which is the protagonist of the following tip to master your finances properly.
Create a Budget
A budget is a tool that assigns a specific destination to each dollar you have. You can use your spending log as a guide for building your budget.
There are several models that you can follow to organize your money, which is based on assigning percentages to large groups of expenses (needs, luxuries, debts, savings, etc.).
This blog will teach you about the 50/20/30 budget and the 60/40 budget.
Don’t abuse your credit card
In the past, one saved to buy what they wanted, but with the arrival of the “magic” of the credit card, the paradigm took a 180-degree turn. It is increasingly common to resort to credit and immediately obtain what we need.
This phenomenon is known as instant gratification, where we prefer to immediately satisfy our desire to buy something instead of delaying that desire for something more valuable in the future.
By constantly resorting to credit to buy things, we are spending money that we supposedly will have in the future. However, what happens if the money we have considered does not arrive due to layoffs, emergencies, or reduced income? That’s where the avalanche of debt begins.
The recommendation is to use credit as little as possible. If you feel like buying something, it is better to save and pay for it in cash. If, by some chance, you have to use a credit card, make sure you always make up-to-date payments and do not buy in installments.
Spend consciously
This is the point where minimalism and personal finance come together. It’s not about depriving yourself of things; it is about ensuring that your expenses are aligned with the things you value and budget for.
For example, if you are a book lover, you will enjoy a nice bookshelf much more than a luxury car. On the other hand, if you love to travel, you might enjoy taking monthly getaways outside your city more than buying designer clothes.
Spending consciously is a personal exercise, since the value we place on things varies from person to person. Every time you buy something, take some time to think: “What value does this bring to my life?”
Worrying and taking care of your finances is completely up to you. Because? Because no one but you will put your money first. If you know someone for whom this article could be useful, do not hesitate to share it.
