Natasha Munson couldn’t be more right when she said,
Natasha Munson
“Money, like emotions, is something you must control to keep your life on the right track.”
Every dollar you earn poses a test. Do you do something productive with that? Or do you just live your life? Do you build your future? Or do you help someone?
Money comes with so many questions.
Luckily, with the right preparation and mindset, you can ace that test with distinction.
Here are 10 nano tips to make you a master of money.
10 Nano Tips to Make You A Master of Money Management
First things first, Do a money audit
Did you know, that many self-made millionaires have multiple income streams-often as many as seven?
It’s faster to grow when money is coming from multiple sources. It’s also less risky as you’ll always have a backup.
To understand your situation, start by doing a money audit
- Where is your money coming from?
- How are you spending it?
In today’s age, it’s easy to end up spending more than you’d want to. An audit will help you figure out where the money is going.
Cut off subscriptions you don’t use
First action after the audit is to cut off unnecessary items.
If you haven’t used a subscription in months, it’s time to let go. If you have a cheaper alternative with a similar level of content, it’s time to switch.
Don’t keep them hoping you’d use them in future. If you haven’t used them as much already, chances are you won’t in future either.
Set a monthly budget
Next up, it’s time to set up your monthly budget.
Your monthly income can be used for 3 purposes-
- to pay off a past debt
- to cover your present expenses
- to build your future.
The more you spend on present and past, the less you’ll have for future.
Ideally, your expenses shouldn’t exceed 70% of your earnings. However, you may not have that financial state yet.
Work towards that goal so that you can keep the other 30% for building your financial future.
Use Zero-Based Budgeting
Let’s face it. It’s very hard to keep track of expenses.
You may do a great job for the first 25 days of the month. But your last five days can create a large enough variance.
Modern instruments like digital wallets and credit cards make it too easy to spend. You should change that by making it hard to spend money.
Once you get your monthly income, create a budget that leaves nothing in the balance column. Every dollar should be budgeted for.
If 70% goes to expenses, the rest should have their pre-defined desitnations like investment, savings, charity, etc.
When you have nothing left after budgeting, you essentially remove the option to overspend.
Invest every month
Investment is like going to the gym.
You don’t become fit and muscular from one visit.
Similarly, you become wealthier once you stick to regular investing habits for months. Investment can be both for financial gain and skill development. Don’t forget that you are your biggest asset, you need to keep investing in yourself.
Only after you have made the investment of the month, go for expenses.
Have a second bank account
However, after zero-based budgeting, where do you put all the money?
In a second bank account.
Some portion of your budget will be cash based, some will be future focused, and some will need a bank account.
Calculate that amount you need to set aside, and send that to your 2nd account.
Go on an All-Cash diet
There’s a lot of talk about going cashless. Ignore that.
Cash is more tangible than a credit card swipe. It also doesn’t feel limitless.
A portion of your expenses should be covered by cash. For example, grocery, fuel costs, etc.
Follow the envelope method to ensure you have a budget for each category and never go beyond that.
Only Withdraw Money from ATM once a month
To aid your envelope method, ensure that you don’t use your ATM card that often.
Calculate at the beginning of the month how much money you need. And then withdraw just that.
After that, leave your ATM card at home.
Purchase only what you need
It’s easy to get swayed by offers and purchase stock for months.
That doesn’t help your finances and makes your budget unpredictable. Instead, go for units that will cover you for a bit over a month.
Set Sinking Funds
Sinking funds are savings you create for a specific future purpose like a tour, birthday party, college fund, etc.
Once you know how much you need and by when, you can set aside an amount monthly to save towards that amount.
In that way, you won’t have any unexpected fluctuation in your monthly budget.
Save for Emergency Funds
An emergency fund is to cover rainy days like medical expenses, income loss, etc. Even Warren Buffett’s grandfather had an emergency fund.
While your emergency fund may not be able to cover all emergencies, it’ll still soften the blow.
Do a monthly money review
After all of that, do a monthly review to check how you are doing.
Usually, money is associated with negative feelings like stress. But you don’t want that emotion to get attached to money.
Get your favorite drink, do the review and then give yourself a small reward for a good month.
You are doing a great job. And you should be the first to recognize that.
Final Thoughts
Money management may seem like a challenge thanks to unpredictable spending.
When you start making most of your expenses predictable, you’ll be on top of your finances. In turn, that will help you build toward a strong future.
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