Some people may be difficult to manage the money. They have high salary but they cannot fulfill the living cost. The money management is not difficult as your imagine. On the other hand, the ordinary clerk who has lower salary can fulfill the need moreover hey can save few dollars from her salary. The clerk can buy house and car because they can manage the money well.
Some people have to much money and they are confused to use the money. They just spend the money for something that they actually do not need it. They supposedly could make more money by investing in stock or precious metal.
You can manage the money easy by following these steps below:
1. You should know the net worth
How much your net worth now? You must have asset such as house, car, motorcycle, computer, furniture, and else. Separate the asset that you do not have it. Remember, Do not list the house that you hire in your asset list because it is not your own. Car that you have not finished the payment is not also your own but he lease company own he car. You will have he car when you have finished to the credit. Sum the entire of the assets.
The assets reflects of your wealth. People are said rich if they have so many assets. On the other hand, the poor man has only few assets.
Asset is your capital and is very important for your live. You can use it to make more money. For example, you can lease your house to other people. Perhaps other people need your car to go somewhere and you can hire your second car. The tenant will pay you after their return the car.
The stock or other invest is also your asset. Calculate the asset base the market value not the nominal value. Check the market value of your stock today at the internet.
Then check how much debt you have. Perhaps you have debt to your buddy or brother. List the it to your total liability including your mortgage, car lease, notebook credit and else. Substracts the total assets with the total liability that result net worth. The positive result means we have a health net worth. We hope the net worth is high.
2. Track your spending
Track the spending once you spend the money. You can record the spending every night in your notebook, notes, and others. At the end of the month, you can consolidate all of your spending and write it at the spreadsheet.
The important of tracking your spending to know how much money that you spend. You can also recognize the important spending or less important spending. Separates the need with want to slahs the spending. The need is something that you really need and ignore it can harm for your life, example, food, cloth, education, health, and others. On the other hand, the want is something that you may not need it. You will not die when you do not get it. For example, eating out, cinema, video, leisure, and others. It is important to reduce the want especially you have no much money. You are better to allocate the money for saving or investment.
Begin with food expenses. Here are some examples of your food spending such as: cereal, milk, bread, vegetable, chicken meat, meat and others. Collect the note of your food spending. It is not difficult job to do it. Then you can track your cloth spending. How much you spend for cloth. No all people buy cloth every month. They may buy once in two month.
You should also track your debt payment every month because it is also your spending. If we have much debt, we should reduce it. Some people prefer to pay the debt first than other expenses because they know the debt also if we do not pay it. The interest makes your debt grow.
You should not spend all money for food, cloth, and debt. You can also consider saving. Saving is also spending though you will use the money one day. Do not save at the end of month because you will not save any penny. Set some dollar at the beginning of the month for saving.
You are better to provide cash for emergency fund. Sometimes we must spend money that we have not predicted before. The amount of emergency fund is six time of your monthly spending.
3. Where you invest your money
Most people invest the money to the real asset such property, crop land, car and others. Those investment may not give the high return as the stock or bond. However, those assets can save the value of your money due the economic tight. The stock price or bond price may decline but the real asset‘s rice never decline. The land’s price never decline year to year. The land’s also has no depreciation so we do no have to spend money to maintenance the land. Beside the land, people also invest the money to property such as house, apartment, hotel, farm land and others.
You should invest not only in one investment only. Spread your money to various investment and create the portfolio. It can help you to protect your entire assets. When the economic down, financial asset will also down too. Fortunately, the real asset increase over many times. The real asset may save your wealth. The real asset price has been increasing recently.
A Clever people will invest the money o various investment. They do not depend on one investment only. Some people just invest in one type investment only. Recently, some people invest heir money in gold only due the return of gold price is so high. Someday the gold price decline and they will suffer loss from it. Recently, the gold price is not good as the last year. Perhaps the demand of the gold has declined. However gold could keep the value of our money.
Read Also :
How to organizes Finances
How debt influence net worth
Four Financial Goal Mistakes