3 Basic Money Management Skills — The Kind Tips - Tips for Life, Study, Work and Entertainment

3 Basic Money Management Skills

3 Basic Money Management Skills

Basic money management skills require combination of planning, organization and discipline. The bottom line is to know how much you are taking in and how much you are spending, as well as what is your expectation for the future. Here are three most basic money management skills that you should learn.

1. Set a budget.

Although setting a budget may seem to be easy, this is the first problem for people who don’t know how to manage their finances. Budgeting mainly include tracking the categories of spending such as food, utilities and entertainment, and the amount that is spent under each category. When budgeting is done, you can determine how to cut the costs.

2. Deal with debts.

Debts are useful in terms of speeding access to desired items, however the interests associated with debts can be detrimental. You should assess the debts with interest rates and rank them according the rates. Give priority to the debt with the highest interest rate and pay them off one after another.

3. Save and invest.

You should always be ready for a rainy day when you lose your job or encounter with unexpected situations. Saving money for major expenditures or the rainy days will protect your from the high interest rates that are often coming with debts. You should at least keep a saving account with six months of living expenses for emergency funds.
Saving money for retirement is another story. In addition to just save money into your bank account, you should also consider to invest on stocks, bonds or other financial instruments. Investment can be risky, hence it’s good for you to contribute about 10 percent of each paycheck to your investment fund for retirement, and the amount of investment can be increased when you have sent your children to college and your retirement nears.

*Image source: https://www.moneyadviceservice.org.uk/en/news/young-people-have-dangerous-gaps-in-money-management-skills

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