The foundation of your personal finances
Managing personal finances feels a lot of math and paperwork and calculations. In your mind, you process how much money you make and calculate how much money you spend, and repeat the same process over for a period of time. But, the truth is, your personal finances reflect your psychology, your habits as well as your values you live by. In other words, your mindset plays a significant role in the management process.
Underneath all the software and budgets and planning, there are still rules that can help to improve your financial status.
Spend less than the amount of money you earn
When you earn no more than N600,000/year and then you spend N700,000/year, you will end up either borrowing or doing something you may not be proud of to make up for excess expenditure. If you spend the exact same amount you earn in a year, you won’t have any reasonable amount of money saved for emergencies or major changes. But, spending less than you earn gives you the freedom to save up and prepare for anything that comes. The less you spend out of what you earn, the better.
Always plan ahead of time
This is not restricted to retirement. Setting up an emergency fund enables you to handle unexpected car problems or medical issues. having a retirement plan ensures that you will have enough money when you are unable to work as much anymore. Your financial preparedness should look beyond the next month and into the years ahead.
Use your money to make more money
Wouldn’t you like to know how rich people keep being rich without laboring as much as others? It is possible to make money while you sleep, as long as you save some of it. When you properly invest money, it will generate more money over a period of time. Saving up money is a good thing, but don’t put all your money away in a low savings account with low interest. Use the money you’ve saved up to invest in things that will fetch you more money. It may be spending it to learn an invaluable skill or buying properties. The choice is yours to make. Choose to do the smart thing and invest.
The most vital and essential financial rules do not change. The tactics that worked for your parents may not favor you since you live in a different era. There will be newer ways to save money and invest, but spending less than you actually earn will always be a great way to save up money. Investing that money sounds and remains better than not doing anything with it. Planning ahead of time will forever be better than burning through your next salary as soon as it arrives.