Money Management: An Effective Way To Manage Your Money
Mastering your money is about more than math. It’s about adjusting your mindset. Has it ever happened with you that you've got a lot of money in your pocket and felt excited but don't know where it all vanished away after sometime?
You work hard and smart to earn money but it all goes away and you don't have any idea about it. You might land in troubles and problems because of that as you don't have any record or a particular system to have all the data stored about every penny spent.
If this situation is what you've faced or even if you're facing it right now then you’re at the right place because after reading this article you'll be able to manage your every single penny just like a professional. So let’s jump into it.
Before you know how to manage money, let’s talk about what is the actual meaning of money management and why to manage money.
Before understanding money management, let's make it clear what management is. In the simplest terms, Management is the skill of having control over the various things and aspects or to make a particular system so as to achieve a greater goal.
Just like in a company if the management is top notch then it automatically makes the company to achieve its goals and in the worst case scenario, if the management isn't upto the mark it'll obviously fall down.
According to Wikipedia “Money management is the process of budgeting, saving, investing, spending, or otherwise overseeing the capital usage of an individual or group”.
In simple terms, how you properly use your earned money to get the maximum benefit from a limited amount is what money management stands for.
Step by step guide for managing money efficiently!
Because you are reading this, it means you are very serious about money which is very good.
So first of all divide your earning money (after-tax) into 6 sections. Buy a beautiful record notebook and make 6 columns and write in heading: Need, Investment, Saving, Education, Fun and Entertainment, Donation.
You can also do in excel or google spreadsheet but why let any third party know about your money records that's why I recommended a beautiful record notebook.
Now put 50% of your earning in the “Need” account.
10% in an “Investment” account.
10% in a “Saving” account.
10% in an “Education” account.
10% in the “Fun and Entertainment” account.
10% in the “Donation” account.
The rule here is to be strict with your expenses. This means you've to spend for your needs only from the allotted amount for that particular purpose which is the need account. You can not spend money for the sake of your needs for any other amount let's say the education account or funds. Even if you're running out of money, still you've to find ways to cope up with the needs in the limited amount so provided. This will lead you to real management of money.
This is the method to follow as you would be knowing about every single penny of yours because it is a proven money management system which has transformed the lives of many people around.
Now what you've to do is to spend the money of the need account only for the daily needs stuff like groceries, housing, health, utilities, insurance, rents, food, or any other thing without which you won't be able to live.
Then sort out the investment account for investing in stocks, real estate, investment in some business on a partnership basis and such other investment.
The Saving money can be used for an emergency about which you might not be aware of.
Education money is only used to learn more about your business in which field you are. Whichever field you're in you need to learn and level up day by day.
For instance if you're in Business then you have to upgrade your skills and if you won't then you'll not be able to race forwards and will lag behind.
You must use the amount for buying the books, attending the educational seminars, doing various courses among other Educational and Knowledgeable activities because the more you learn, the more you earn.
Fun and Entertainment money for shopping, for tours, watching movies etc. It’s your choice whether you want to spend this money or adjust in other sections like need, investment etc. It's all up to you.
Donation money is what is necessary for our peace of mind. You might donate this money for a good cause or deed. You can even help somebody without being selfish.
This particular act of yours would make you feel satisfied about doing something good in life. If you want to feel rich then it is very essential for you to donate some amount for a good cause.
In the end it’s your choice whether you choose this money for donation or want to adjust in other sections or accounts.
But the first four sections are compulsory in any situation for good money management.
So this is the simple money management system by following which you can efficiently and effectively manage all your funds or money. But it's not going to be an easy road. It will only turn out to be successful for you if you'll do it with patience and persistence.
You may earn in huge numbers or so but if you don't know how to manage the money then it would slip down just like sand out of your fist.