Basic Money Management Tips:
- Save money. Very basic, but very important. No matter how much money you are earning, if you are spending all of it, you will never be able to invest and make it grow. Think hard about what you are spending your money on, and how you can spend less and save more. Quite often there are some simple things that you are wasting money on that you can cut out easily without even making much of a sacrifice. You can make a budget on your own to help track these things, or you can use one of the many free online budgeting tools to help you. Saving some money is the first step to financial security and investment success.
- But, don't save too much money. The true point of money is not to have it, but to spend it. If you spend your life like Ebeneezer Scrooge, hoarding every coin and never enjoying yourself or being generous to others, you will end up as miserable as he was. Save some money, but don't save all of your money: spend some on yourself so that you can enjoy your life, and spend some on people you love to help them enjoy theirs. Find a balance between saving to prepare for the future, and spending to enjoy the present.
- Have an emergency fund. Life is full of surprises: some positive, and many negative. When some bad thing surprises you - like getting fired, your car breaking down, or an unexpected sickness or injury - you will need to have some emergency cash to deal with the consequences and get back on your feet. Ideally, you will want your emergency fund to be large enough that you could live frugally for a few months on it without any other sources of income.
- Have a retirement plan. People think they will be young forever, and forget to think about the future. Don't make that mistake - make plans early in life so that you will be able to retire and enjoy your old age.
- Pay off debts quickly. Benjamin Franklin lived free of debts. He wrote that he wanted to start a club of people who were debt-free like him, and call it "The Society of the Free and Easy." He thought that paying off your debts makes your life "free and easy" because you don't have obligations hanging over you. He thought of debt as a type of bondage or servitude, and financial freedom as one of the important freedoms of life. Sometimes, debt is inevitable and acceptable: going into debt for a house, car, or worthwhile education is fine. But after you're in debt, try to get out as quickly as you can.
- Insure yourself and your future. Insurance is a wonderful thing, and you should take advantage of it. Get insurance against the most catastrophic possible events: your death, serious illness or injury, and loss of your most valuable property. With insurance, you and your loved ones will be able to deal with the consequences of these catastrophes.
- Find safe ways to make your money grow. After you have managed some of the basics listed above, start to do some actual investing. When your money is invested, it is constantly working for you and growing, even when you're asleep. Find some investments that match the level of risk you're willing to take on, and allocate some proportion of your income in them. See our advanced tips for more investment suggestions.
- Invest in yourself. People talk about investing in stocks, bonds, currencies, and corporations, but it seems like they don't talk enough about investing in yourself. Your life is not about money, it's about you. There are many ways to invest in yourself. You could invest in an education. Education is an investment that will not only enrich your life, but could also lead to more financial success. You should also invest in yourself by building good habits. Little things like eating well, exercising, and resting and relaxing enough, can seem small but can greatly improve your mood, your productivity, and even your longevity. As you manage and invest your money, remember that you're not trying to be rich, you're trying to live richly.
Go back to the tips page.
Find our basic tips here.
Find our advanced tips here.
Find our guide to volatility here.
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