It’s easy to make personal finances complicated. However, money management, at it’s most basic, doesn’t have to be complex. While increasing complexity comes with your progress in financial knowledge, and in different ways to earn and invest your money, it’s best to start out simple — with Personal Finance 101. As you start getting your money under control, here are 3 basic rules for successful money management:
1. Spend Less Than You Earn
This is something that is said over and over again. And for good reason. If we were all spending less than we earned, we wouldn’t see some of the financial problems that appear rampant in our society. This basic rule is often ignored. However, if you want successful finances, you have to look for ways to spend less.
Spending less than you earn means making sure that you live within your means. Look for ways to cut back on what you spend. Prioritize your spending so that your needs are taken care of, and so that you have enough money to set aside for savings. Find ways to trim your bills, from using energy more efficiently in your home to clipping coupons and hitting sales at the grocery store. Discipline in your spending is vital if you want to manage your money successful.
2. Earn More Than You Spend
What? Didn’t we just cover that? Not exactly. In my mind, these are two different approaches. Spending less means that you cut your expenses. Earning more than you spend is, to me, a little more active. It means that you look for ways to earn more money. This can be from cultivating passive income sources, or from getting a part-time job. When you focus on finding creative ways to earn a little more money, you are taking an active role in your financial future.
Successful money management means taking responsibility for your income. You don’t have to rely on traditional job — someone else — to provide your income. Earning more than you spend is more of a mind set. It indicates that you are ready to take responsibility for your money choices, and that you are ready to be active in improving your financial situation.
3. Know Where Your Money Comes From — And What It Is Doing
Finally, you should know where your money comes from, and what is it doing. Track your spending so that you know where you are spending your money. Be aware of what is happening with your money. Understanding how you get your money, how it can work for you, and where it is going are all important. If you don’t know what is happening with your money, and why it is happening, you will find it difficult to be successful with money management.
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