How to get rich. How to get out of debt. How to manage money. Many people want to know the best way to make money and maximize it to grow. Someone who can do that will overcome their debts, earn a retirement, and be on the path towards achieving their financial goals.
In this article, we aren’t talking about how to earn money. This here is about how to keep and manage your money wisely, getting maximum ROI on the income and savings you already have.
1. Wealth Is A Result Of A Lifetime Of Work
True wealth is not created in a day. It requires decades of work. Managing your money wisely is not about creating wealth in a year or less. It’s about making the right decisions to maximize your dollar, give you a positive financial outlook in the long term, and put you in a better position for savings growth.
2. Create A Budget: Income V. Expenses
Making a monthly budget is the first step to money management. Identify how much money, on average, you make every month. Then, list your expenses, i.e. rent or mortgage, utilities, subscriptions, lifestyle spending, and what you put into monthly savings. Understand your spending habits and adjust them based on what seems most profitable to you.
3. Set Realistic Long-Term Financial Goals
Determine what you want from your money. A house. A car. A new guitar. To pay for a hobby you’ve always wanted to try. To go on a trip. Have realistic goals and calculate how much the expense will be. Map out a way to get to that number slowly over time. You may need to change your money habits if your income or expenses are too high.
4. See Where You Can Make Cuts
Consider where you can lower expenses. Buying cheaper groceries. Moving to somewhere with cheaper rent. Cutting out certain types of spending altogether, i.e. fast food. The less you spend, the more you have to save, and there is more to put toward your short-term and long-term financial goals.
5. Make A Commitment To Save Every Month
Savings are a must. To manage your money wisely, save more. Even if you have very little to put towards it, have a set amount you take from every paycheque and put into your savings account. It can be as little as $20. In time, plus interest, this amount grows into something more. This is how you start building for the future, i.e. buying your first home, retirement savings, etc.
6. Speak with a Financial Advisor About Investing
If you are interested in investing, consider discussing different investment products with a financial advisor. Investing in a very safe, conservative way can yield better returns than leaving your money to gather interest in a savings account. The earlier you start investing, the more money you make in the long term, especially as your investment portfolio grows over decades.
7. Learn More About Money Management
Consult with your financial advisor regularly. Become more financially literate. Start learning to manage your funds, investment products, credit products, and money management strategies. The more you know, the better.
There are lots of ways to grow your money over time fairly stabilized, but there are also risks and mistakes that everyday people make. More education around money is something that every person interested in wise money management should make time for.
8. Have an Emergency Fund Ready to Pull From
Your savings are there to add stability but also to be used when you need them. None of us know what life is going to throw at us. You could lose your job, be involved in a car accident, or encounter a health emergency, which may require pulling from your emergency funds.
Alongside starting a long-term savings account, start an emergency funds savings account with the same strategy. Put a little in with every paycheque and slowly build it up.
9. Pay Off All Debt and Don’t Accumulate Any More
Eliminate all high-interest debt. Start by getting rid of high-interest loans and credit cards and paying them off. Limit your debt as much as you can. Save yourself that interest.
Instead of buying something and putting it on a credit card, save for it and buy it with your funds. Eliminate the financial burden of debt. That’s key to a stable financial future.
10. Debt Repayment Methods: Snowball V. Debt Avalanche
Let’s say you have three credit cards that must be paid off. There are two ways of becoming debt-free.
The ‘snowball method’ involves paying off your smallest balances first while making all minimum payments on all debts. This adds confidence to your balance sheet and can make you feel good about your progress, though it does not target high-interest rates outright.
The ‘debt avalanche’ method targets debt based on their interest rate, from highest to lowest. Put your money towards the debt with the highest interest rate first. This will reduce the overall amount you pay over time by targeting interest instead of the smallest balances.