Even after putting in years of hard study in school and college, it is really unfortunate that most young adults are completely clueless about managing the money they will be earning or have started to earn. Most people tend to shy away from understanding how money, savings, and investments work, but once you apply a little common sense it is not so hard. Read on to discover how you can make your money work really hard and save yourself the pain of poor money-management.
Self-Control Is Essential
It can be very tempting to succumb to the lure of myriad things when the money in your pocket seems limitless. Find out how much you are really earning and have at your disposal to spend and then decide what is essential and what is not. It is always the best policy to stay within your monthly income even though it might mean sacrificing many luxuries. Even if you have acquired a credit card, use it only when essential and when you are sure that you can pay it off fully when the statement comes and not roll over the outstanding at a really high rate of interest. Do not acquire more credit cards than you can really keep track of.
Manage Your Own Finances
Unless you know how to manage your own money, you have to rely on the advice of others who may not be competent enough. It may be a very good idea to pick up a few books on the basic elements of money, banking and personal finance so that you know what are the pros and cons of every activity. Without undertaking how money actually works, it can be quite difficult to make it work for you. There are also loads of information and tutorials available on the Internet that can give you a perspective on virtually all aspects of personal finance.
Know Your Income and Expenses
The vital thing in personal money management is to always ensure that you are solvent. This really boils down to ensuring that you spend less than what you earn. Most people don’t bother about this but creating a budget really helps in understanding where your income disappears and how much you can really save for the future. Take a notebook or if you are comfortable with computers, open a spreadsheet and list out all your monthly expenses. The best way is to think in an organized manner and note down even the smallest of expenses.
The budgeting exercise will soon reveal if you are frittering you money away and allow you to make slight changes to your lifestyle that will result in real savings. It is important to appreciate that even seemingly-small savings every month have a snowballing effect and can add up to a handsome amount over a period of time. Remember to create a special fund for use in emergencies. Always keep watch on the EMIs you are paying on your car; sometimes you can save a lot of money by terminating the lease agreement. Visit www.leasequit.com to explore the possibilities.
Just because you are young does not mean that you do not have to think about retirement. Make it a point to invest in your company’s retirement plan as you get a tax advantage. Company-sponsored plans are also great as your employer will usually match your contribution making the savings grow much faster. You should be generally aware of how taxes work as otherwise you can be confused as to how your paycheck has effectively slimmed down when it gets in to your hands.
Buy Insurance Adequately and Wisely
When you are young, ill health and accidents can understandably be very far away from your mind. However, considering the prohibitive cost of medical treatment even for minor injuries or ailments, it is a wise decision to buy adequate medical insurance immediately. You can save a lot of money by doing a comparison online of different insurers. Also make it a point to obtain household insurance to protect your valuable assets from theft or fire. You can protect your ability to earn with a disability insurance that will assure you of a steady income in case you are unable to work due to injury or illness for an extended time.