Wondering where your salary goes? Do you want to take out a loan to buy gifts for your loved ones? Can’t afford to put aside money for hobbies, like painting or gambling at National Casino Deutschland? Think investments are only for millionaires?
If you answered yes to even one of these questions, then you should definitely consider your level of financial literacy. Here are 3 basic money rules that will make your life easier.
Keeping Track of Your Income and Expenses
This rule is as old as the world, and the advice to “keep a personal/family budget” you’ve probably heard many times. But let’s be honest, who really keeps track of their money spending and receipts on a regular basis? Few people do.
When you know exactly how much a month is spent on food, clothes, or entertainment, it’s easy to start saving for vacations, plan for expensive future purchases, and avoid budget deficits (when expenses are suddenly higher than income).
If you mostly use cards, it’s easy to keep track of your expenses and income in the bank’s online app. If you like to write by hand, make a separate notebook, where you will control your budget. By the way, it’s hard for a person to learn to take virtual money seriously because it’s important for us to see/calculate/feel it. Try to be conscious about spending electronic money rather than seeing it as a toy.
Financial Cushion
It’s impossible to predict when you will need to buy expensive medicines, restore documents or repair the apartment after the upstairs neighbor forgot to turn off the faucet in the shower. Therefore it is necessary in advance to “lay a straw” in the form of a financial cushion, so that in an emergency, you don’t have to borrow.
How to form such a cushion and how much should I save? The final amount of savings should be equal to 3-6 your monthly salary. It’s recommended to save an amount equal to 10% of your income each month. Even if you are used to spending your entire salary. It’s possible. You just need to make a decision and work on your discipline.
As for a place to store your financial cushion, an envelope under your mattress isn’t the smartest option. Savings will also make your life easier if you decide to move to another city or country.
Set Financial Goals
If you want to take a trip to European countries next year or buy an apartment, for example, it’s worth thinking about how much money you will need and how many months you will have to save. It’s important to adequately assess your current capabilities, calculate the timeframe for achieving the goal, and choose the right strategy.
Material desires are good, allow yourself to dream. The main thing is not to give in to social pressure and not to chase fashionable, but not bringing happiness purchases. Once a month review your goals, perhaps new ones will appear and some will become irrelevant.
