Basic Money Management

Basic Money Management

spend less saving money debt

Whether our economy is in good or in crisis situation we must don't be bother in our personal finance if we know some basic money management. Then if not, it is never too late to learn the basic skills of proper money management. I highly recommend taking a brief course on finance if possible, but there are other ways that we can develop a strong financial foundation that will get through our life and help us to face finance crisis with less worries.

Basic money management can be broken down into three main principles – Spending Less what we make, Avoiding Bad Debt and Saving More.

Let us take a look at each one and determine how we can start including these principles into our own life.

1. Spending Less what we make

This principle is a very important lesson that we must learn but unfortunately, it is a hard one to practice. While most of us gets and understand the point that we have to spend less than what we earn if we want to stay in our budget and debt free, but that concept tends to fly right away out in the window when facing with everyday life. 

By prevalence of credit cards, easy payment plans and a lack of knowledge in personal finance led many into spending much more than what we are make.

One of the best ways to start spending less is simply to monitor exactly what we spend. Make a budget, keep a log and determine where we can cut expenses. A budget is a vital tool that will help us to learn more about the flow in and out of our money.

Keep this a habit in a long time, we have more chances to become a millionaire.

2. Avoiding Bad Debt

This is a major problem for many of us and it is only getting worse. Fail to practice principle number one has a higher chances to fall in to debt. It is very important to recognize that there are two main forms of debt – good and bad. If you have gotten into a bad debt trap, getting out of this is extremely difficult. Remember, bad debt is something that drains our finances, good debt is something that adds to it. 

Reduce our amount of bad debt, increase our amount of good debt and watch our finances turn around. Or if we can totally avoid to borrow money then it is much better. Keep debt free as possible as we can. So that we have a higher chances to save more.

3. Saving More

No matter how much money we make, saving part of it is the very important. Whether it is a simple emergency fund that can help us get through bad times, or a fund for retirement, saving is essential. If we find it difficult to have any extra money each month for savings, it is time to investigate how we can change that.

Whether we need to find a better job that pays more, manage our finances better, or find ways to create more than one stream of income, there are many ways that we can start saving more money.

These three principles will help us to learn more about how our own personal finances work and how to start managing our money more effectively. Everyone makes mistakes, but the difference is how we act on that mistakes to distinguish the problem and implement the solution.