Wednesday, July 25, 2012

Effective Ways to Manage 3 Areas of Personal Finance

Effective Ways to Manage 3 Areas of Personal Finance

In life, when you do not earn a reasonable amount, you may not have enough to spend and live a decent living.

When you have earned sufficiently but you spend freely or gamble away your earning, there will be nothing left or worse still you will be in debt.

When you can earn and spend within your means, you may not be able to invest and grow your wealth because you are greedy. You want quick gain and get conned.
The objective of personal finance is financial freedom. To be  financially independent it depends on how much you can earn, the way you spend your money and how you grow your wealth.  

1.       Maximize your earnings: You start off as an employee and the amount you can earn depends on your skills, education and experience. You learn the secrets of the trade and get more productive and every year you get your pay raise. There is a limit to what you can earn even if you change to another job. An ideal position is that your earnings are able to cover your expenses plus an amount for savings.   If you want to earn more, you can get a part-time job, but the amount is still limited. Starting a business of your own, especially an online business is the best option.  The most important thing of a business is a unique idea. There is no limit to what you can earn as long as you are willing to take risks associated with running a business as an entrepreneur.

2.       Prudent spending: The key to wise spending is to avoid getting into debt and spending more than you earn. You will incur interest and pay more for an item that you can pay in cash. Be practical, when a small car can provide the transportation you need, don’t spend more for a bigger car.  A car depreciates in value over time especially during the first few years. Buy what you need according to your budget and get what you want only if it is within your means.  Learn to appreciate what you can afford and what you have. Avoid bad habits like gambling because it will empty your money and ruin your life.   

3.       Grow your Wealth: When you budget for your monthly spending, you are also wise to include an amount for savings. The amount is crucial to be set aside for a rainy day. The monthly savings is also to be accumulated over time so that you can invest and make your money grow. Investment is for the long term and diversification is the key. Invest in many vehicles such as shares, unit trusts, gold, property and bonds. Your wealth will be good for your children’s education and for your retirement. Avoid scams and get rich quick schemes.

Take a three-pronged attack to manage your finance: earn more, control your spending and invest wisely.

Related post:

Are You Financially Successful? 

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