Money Management starts with a mindset.
So What exactly is Money?
Money is just a tool to sustain your day-to-day life, to put a roof on your head, to put food on your table and to buy some of the luxuries that you wish for.
Having a good amount of money will definitely give some freedom in choices.
But having money will not definitely be like a magic wand that will erase all your problems in your life.
People are still miserable with having great amounts of money.
So it’s just a tool to have freedom in choices.
So what will be the things that you need to manage money?
1.Budgeting
2.Your Spending Habits
3.Importance of Goals & Discipline
Budgeting is more of a psychological game than a numbers game. Numbers also play an important role but it is the mindset that matters. You need to set aside your monthly recurring expenses, set aside for some entertainment and some for investment. Now here the order plays a very important role.
Having Investments like Sip’s, RD’s etc on Autopilot Mode is very crucial in budgeting. Because having money left for investments at the end of the month can make us spend money on the products that we don’t need due to the Impulsive decisions and having no money left for investments.
You’re likely not to buy a product if you’ve to go through a tedious procedure of withdrawing your SIP’s money which will take some days eventually killing your desire for the product till the money arrives in your account.
Now there is no hard and fast rule of how much % of your income you should invest and spend which will totally depend on your financial condition and your financial responsibilities.
Not having financial responsibilities can be a ticket to retire early if you invest a substantial amount of your income.
Best way is to segregate all your expenses and have an upper limit on them, this creates a barrier in your mind of how much you’ve to spend on that particular item.
Spending should only be done on products that you need and not want. For e.g: You probably don’t need that smartphone which you need to buy on monthly plans rather you should spend that money on things like quality food, your gym membership, comfortable shoes that will last long etc.
Spending money on quality products that will last you long will probably save you money in the long term and have mental peace rather than dealing with a product that falls on you in crucial times.
Set Some Goals related to things that you wish to buy like buying a house, saving some money for a vacation, buying a car etc. But before buying a depreciating asset that needs constant maintenance you need to set aside some money for its maintenance before buying it.
By doing this, that depreciating asset will not eat into your money from your regular income and disrupt your monthly recurring expenses.
Now to achieve some of the goals you need to be disciplined. Consider sips as an EMI for your future self.
Some Tips:
Conclusion: Money management is all about managing your mindset about money.
Good-luck Trading!!!
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