There are three big reasons why you should be concerned about proper money management: The first is that almost anything you wish to accomplish in life takes some money.
It takes money to raise children, get an education, pursue personal interests and hobbies, buy and maintain a home, travel, start a business, launch a new career, move across the nation or to another nation..
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almost anything of significance takes money.
Second, if you are constantly short of money and worried about it and about what you may not be able to provide for yourself or your family you lack the time, energy and ability to pursue the many exciting and enjoyable things that you may want to do.
Third, and perhaps most importantly, without financial security your golden years could be lined with tin.
If you think that the government will take care of you, that a single 401k account will cover it all or that the company pension, if you are one of the few who still have one, will necessarily be there when you are 70 then you are leaving yourself open to a very nasty surprise.
There are eight essential steps you should consistently take to manage your finances well: 1.
The single most important thing you can do to manage your income and create wealth is to pay yourself first.
Set aside a percentage of your income before you pay anyone else.
Keep it in a safe place - a savings account until there is enough to pay into an investment account.
Do not spend this money for anything.
This is your nest egg.
This is your retirement security.
This is your wealth.
The recommended amount to set aside is not less than 10%, however if you cannot start out saving 10% save what you can, even if it is only 1%.
Increase that amount whenever you can, especially when you have a windfall, tax refund or pay raise.
2.
Manage your checking and savings accounts carefully.
Know how much money you have on hand at any time.
Reconcile your accounts when you receive statements or by using on-line banking software.
3.
Balance your saving by setting aside some percentage to give to charity.
This may not seem like a wealth tip, but it is.
People who regularly give to others prosper more, as a rule, than those who do not.
If you cannot afford to give as much as you save give what you can and build that amount up.
4.
The ideal savings plan which you should work toward is the 10-10-10 plan.
Under this plan you save 10% of your income for long term financial security and retirement, 10% for short term expenses such as vacations or auto purchases, and 10% for charity.
Learn to live on the 70% left over.
People who learn to live below their means have much greater financial security than those who live at or beyond their means.
5.
Eliminate all consumer debt.
It is acceptable and necessary for most people to incur debt to purchase their home and for many to buy a car until they have saved enough to pay for them with cash.
All credit cards and revolving credit accounts however should be paid off and any new charges paid within a month.
Consumer credit steals your ability to accumulate wealth.
6.
Invest short term savings in safe and liquid accounts such as money market accounts, savings accounts or Certificates of Deposit.
Invest long term savings in a diversified mixture of accounts balancing risk with return and depending on your age.
The older you are the more conservative your investments must be.
Investing is not a passive activity; you must educate yourself about your investments, their load or cost, and the risks.
If you cannot do this yourself consider hiring a reputable financial advisor.
7.
As a general rule the less often you buy new high cost items, like homes and autos, the more money you can save.
Buy good used cars and drive them as long as you can.
Avoid second mortgages and do not mortgage your home to pay off consumer debt.
8.
Find ways to generate supplemental income to increase your savings.
Consider starting a business and if you lack the resources to start a conventional brick and mortar business consider a home based or internet based business.
If a business seems too difficult consider a part time job.
These are the basics.
It is not an exhaustive list of all you can do to save, invest, build wealth or manage your wealth well.
However most people do not even do these simple eight things.
If you do you will be far ahead of most people and well on the way to creating financial independence.
Be patient, this takes time, and depending on your income and your indebtedness it may take considerable time.
Believe me, when your savings account reaches $50,000 you will be so glad you did this.
In addition to doing these things continue to learn about other things you can do to save money, build wealth and attain financial security.
Read good books on the subject.
There are many, but a very good place to start is with a very easy to read book titled The Smartest Investment Book You'll Ever Read by Daniel R.
Solin.
Another very good one is The Millionaire Next Door by Thomas J.
Stanley and William D.
Danko.
Continue your education.
Continue reading about these subjects.
The more you know, the more you can accomplish.
Financial independence is within the grasp of most Americans who use self discipline and manage their money wisely.
It will be so for you as well if you do these things.
[This information is provided as general educational material only and is not a substitute for professional financial advice.
You should consult a professional financial planner for professional advice about your investments.
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