Hey guys! I hope you are doing great. Today I decided to write about how I made the best use of my money over the years that gave a sense of peace and financial freedom in the long term.
I will share all the tips because of the lessons I have learnt in different phases of my life. But before I write anything, I want to ask you something. Have you read my blogpost on “How to save money in 4 simple steps”? If not then please read that before you start with this post as it would make more sense then.
Now let’s begin to discuss what are the best ways to manage your money in the right way.
Before I start talking about what you should do, let me give you a little glimpse of my financial journey and how I became my own personal financial advisor.
I come from a conservative family who knew nothing about personal finance. My mother has always been a home-maker and my father earned well but was extremely poor with money management. Because of his spendthrift habits, low business acumen and anger issues, we lost everything about 17 years ago.
However I do want to mention that I didn’t save a penny until I was 26. It took me 9 years to learn the lesson of money management.
I felt I wasted 9 years of my life in living from paycheck to paycheck. I don’t want to think how much interest I would have earned for my savings in these 9 years.
Why wouldn’t that be? We don’t get any education in schools about money management and in my case my parents were not quite well versed on the subject as well.
After 26, I started investing and saving money in a more organized fashion and I saw a huge difference in my finances.
Once you have earned money make sure that you let money work for you.
Having said that I want you to follow these steps right now to have a better financial future for yourself. Like START RIGHT NOW..
I remember when I created a financial goal for myself in 2016 of saving a lump sum money as a term deposit. I did everything I could within my reach to achieve that goal. I started with transferring 20% of my salary to another savings account as soon as I got my salary credited into my account. I didn’t shop for luxurious items for the year and I kept my expenses bare minimal.
You can also have what you want but remember to create it in the form of goal. You can read my goal setting guide to know the exact steps to make and achieve goals.
To start with savings, I want to specify that I am very disciplined when it comes to my savings. I created 30/50/20 rule for myself and I stick to it every single month.
Now if you don’t know anything about it then please visit the blog on “How I save money” where I have written about it in detail. The concept of 30/50/20 rule is that I save 30% of my salary first before spending the money. I suggest this technique to anyone who is struggling with saving money.
I carefully studied my financial goals and created this concept.
The great thing about this practice is that it organizes your finances efficiently. It has helped me in building my emergency account, plan for big events and prepare to have enough cash flows and pay off the loans as quickly as possible. It is flexible and you can tweak it basis your requirement just by following the concept.
Let’s understand this concept in detail.
I usually keep this first whenever I am under some kind of debt or loan. It becomes my utmost priority to clear the debt off as soon as possible.
So I would keep this account active and put 10% of my saved money here every month.
I love investing in mutual funds as I feel that they are the best way to make your money grow. I will try and write about equity shares in the upcoming posts, so stay tuned for that.
Seriously anything that you anticipate to kill your life’s motive, please avoid as much as possible. Emergencies don’t come after telling you. They will just happen and create havoc in your finances. The best thing is to avoid them by preparing for them.
You can make your own rules when it comes to emergency account. It can be 3 months, 6 months or an year of expenses into this account. World is your oyster my friend 🙂
If you have a question about passive income then let me begin by answering this question first.
I really like creating passive income for myself and this has been in my goal sheet for quite sometime. The purpose is that I want to have a secondary income apart from my salary from full time job, in order for me to have a better financial future.
The best form of passive income I like is investments in shares and mutual funds.
Now this might be very difficult for many of you to understand because of these two reasons –
The money invested in the equity market with time grows exponentially and creates a sustainable wealth, compared to the term deposit.
What is important is that you invest the money in order for it to grow. You can choose term deposit or other safe options available like Public Provident Funds that has a very low risk bracket.
Take advice from your financial advisor or read material to gain more knowledge on the subject. Do whatever to ensure that you are doing the right kind of investment.
Provident Fund Account is the best way to save money for your retirement. I have worked mostly for the employers who straightaway gave me a PF account while joining. However people who are self employed or into their own business, you should open a PF account for your retirement.
I would also like to mention that PF account is named differently in different countries. I know in US it is called 401K, but I am not sure about what it is called in other countries.
I think it is an amazing way of ensuring financial stability during the days when you cannot make money.
That’s it guys! I had a great time working on this article. I know it is hard to save and curb all the cravings to shop and spend all your money. But trust me, the feeling of seeing your money grow is out of the world.
I would see you in my next post.