Basic Principles of Personal Finance Management: Top 6
There are many different methods of financial management. We have identified 6 principles, based on which you can organize effective money management, choose the right investment directions and reduce the risk of losing funds.
1 Make finances work.
To do this, you will need not only to earn, but also to properly maintain and increase capital. We need money, first of all, to provide ourselves with housing, food, and entertainment. We have income while we work. In old age and in the event of unforeseen health difficulties, you can lose your earnings. In order not to be left without money, you need to think in advance about saving part of the finances and increasing them.
By investing today, you provide yourself with income in the future. Savings must work. This is the basic principle of personal finance management. Choose suitable investment areas and regularly invest part of your savings to get more profit.
2 Spend less than you receive.
Free funds that you need to invest can be obtained by observing this basic principle. Spend less than you earn. Invest the remaining amount and set aside to create a "financial cushion". It will come in handy in those situations when there is an urgent need for funds for treatment, assistance to loved ones, daily expenses in case of job loss, etc.
3 Keep track of income and expenses.
To manage your finances, you need to assess your capabilities. First you need to organize control over all financial receipts. Count your income. You also need to keep track of expenses. The first two months will be unusual and difficult. Then you will automatically record all expenses.
To calculate income and expenses, you can use account and card statements, store checks and checks from ATMs. Accounting can be kept in a notepad or on the phone, in a regular Excel document or a specialized program.
4 Start investing as early as possible.
The sooner you start investing, the more you can save and earn. Part of the income is lost every day when you don’t invest. Profit from investments depends on the amount of contributions, the operating conditions of the instrument and the period of savings.
5 Invest regularly.
Always leave a fixed amount for investment. Train yourself to invest monthly. If in some month you could not spend part of the income on investing, try to invest twice as much next month. When there is no money for regular investments, you can use the "financial pillow". Do this as a last resort.
6 Learn financial literacy.
An important principle of personal finance management is continuous self-improvement in this area. You must understand the nuances of working with money, the basics of investing, the rules for calculating taxes, etc. Try to constantly learn new knowledge to improve financial management, reduce risks and follow your financial plan. And also subscribe to our channel. where we try to publish interesting content that helps you take control of your personal finances.