A Plan To Take Control Of Your Money Management
Money Management : You have found out how rich you are and how you can manage your finances – that is, whether at the end of the month you regularly have either a financial surplus (you earn more than you spend), a financial deficit (you earn less than you pay) or a balanced budget (you spend as much as you make). Now, what next? Set a plan for your future money management.
If you want to work on improving your financial health and getting into a state of economic well-being, you need to be able to save some money every month.
How much of my monthly income should I set aside?
There are several views on how much is ideal for saving. This amount depends, of course, on the amount of your income, as well as on the life situation in which you are. At each stage of life, people have different priorities, goals and lifestyles. What financial goals do people usually have at various stages of their lives, and how do they plan their budget
In any case, however, the more you save, the faster you build wealth, which you can later use, for example, to pay an annuity or passive income. There are various theories, instructions and calculations on how to handle and how much of your savings you can regularly withdraw so that your savings do not decrease. You can read more about annuities and passive income from investments if you enter the term 4 percent rule in the search engine. The 4 percent rule describes practices for achieving regular annuity payments so that your capital lasts forever and never runs out.
It is ideal for saving at least 10% of your net income. If, for example, with a revenue of 1,000 euros, you would regularly save 10% of your income for long-term savings, i.e. 100 euros per month, with an average appreciation of 6% pa, you would have:
- for 20 years, the amount of 46,435 euros,
- for 30 years, the amount of 100,954 euros and
- for 40 years, the amount of 200,145 euros.
Money Management: If saving 10% of your income seems too much, you can start with, for example, 5% of your income that you save every month. If keeping even this amount is difficult, try to start with at least the minimum amount you can imagine putting aside. Developing the habit of saving a certain amount of your income every month is essential. Over time, for example, when the salary increases, you can increase the share of money intended for saving.
What if I don’t manage to save as much as I would imagine?
If you’re not saving as much as you’d like, living paycheck to paycheck, or even spending more than you earn and increasing your debt, you must do everything possible to stop this trend. There are two ways to achieve the long-term goal of making more than you spend.
Either you manage to increase your income or reduce your expenses.
First, I recommend that you focus on how you can reduce your expenses. First of all, it is necessary to shed light on your consumption and specifically on flexible costs to find out which are unnecessary and which you could give up.
At the same time, looking at your existing financial products is very beneficial and seeing if you are paying more than necessary in fees and interest. When reviewing financial products, a person can save an average of around 100 euros per month. You can read more about how not to redeem your financial products.
If even activities to reduce your expenses are not enough to regularly spend less than you earn, it is necessary to start focusing on the possibilities of increasing your income.
Also Read : What Is Coaching, And How Can It Help Me?
