What you’ll find in today’s article are not magic quotes about how to get richer. These are the 10 basics of economic activity for every modern person that will help to manage their money wisely: save it, spend it rationally, and invest it correctly.
Spend less than you earn
In 1960, the famous Marshmallow Experiment was conducted at Stanford University. Scientists offered a group of children a piece of marshmallow. Then they said they would leave for a few minutes, but if the kids could be patient and didn’t eat their marshmallows, they would get another piece. As a result, only a third of the children did not succumb to temptation and received their reward. Years later, these children showed higher levels of success in many areas of life.
The ability to limit your desires and save money is a key skill in achieving financial freedom. Make it a rule to save at least 10% of your income every month, you will be able to live on the remaining 90%, right?
What is it for? In the future, you will be able to create passive sources of income on the basis of this capital, replenish the reserve fund or save funds for something expensive.
Meet basic needs first
When the question is between “set aside this amount for the purchase of an apartment” and “once again go abroad”, what choice will you make? Common sense dictates that the basic need for housing should be met first. And only then you can embark on all the hardships and spend money on entertainment.
Do not make spontaneous purchases
A small story of a real person is quite appropriate here: “Once I was in another city and came across a huge book market. My passion for books is too great that I don’t get stuck there for an hour. And as a result, I came out of there with a stack of books. Not only did they make it difficult to move around, but I haven’t read any of them since. It was completely meaningless. “
Here’s another fact. By the end of 2019, the global advertising market will be $625 billion. Do you know what a good percentage of that money goes to? To force you to break this rule and still make spontaneous purchases.
The way to avoid this is to plan your expenses. Make your budget every month. Allocate mandatory payments (utilities, transport, Internet, various subscriptions, etc.), funds for food, entertainment and other categories.
Consider not only the cost of the purchase, but also its content
When making a purchase decision, take into account hidden expenses that are not included in the main price. Buying a car means spending on gasoline, spare parts, insurance, maintenance, etc. Traveling abroad means not only a fee for the finished tour, but also other expenses for souvenirs, additional excursions and force majeure. Consider this factor and always plan your maintenance budget.
Create financial reserves
Any state or private enterprise has reserve funds in the budget structure. Their presence is due to the unpredictability of the world in which we live. Financial crises, job loss, sudden illness, a lawsuit from a detractor – all these “black swans” can instantly empty your wallet. Be sure to create your personal emergency fund.
Track your spending
There are three main mysteries of life: where the dust comes from, where the socks disappear and where the money goes. Well, at least one of them you can solve. Observe your spending for a month, and you will surely find surprising patterns. And yet – a lot of opportunities to save.
You can simply collect checks and write down amounts in a notebook or use one of the mobile applications for financial management.
Learn to save money
The ability to save is not a miserliness, but a conscious approach to making purchases. Never grab the first item you come across. Take a little time to research the market and choose a better deal. Bargaining – it costs you nothing, except for the benefits that you can get. Use discount programs, cashback and in general everything that will help you save any share of expenses. Just do it all without fanaticism.
Look for sources of passive income
An intelligent person works for money, a wise person has money working for him. This is roughly how the passive income paradigm can be described. If you did everything right, diligently saved money, then over time you should accumulate a small capital. Now you’ve come to the most important step for your financial freedom – creating a source of passive income.
There is no need to describe why it is so cool – you yourself understand everything. You just need to take care of it and look for opportunities to invest your funds. It can be a business, securities, a deposit – anything that will bring money without your participation.
Diversify your risks
Remember the story of how Robinson Crusoe saved his gunpowder from being struck by lightning? He just put it in a few bags and hid it in different places. This was his main capital, and he disposed of it very correctly.
So should you. Keep money in different jars (not glass ;)), in different currencies, use different sources of income. This will save money from inflation, crises, thieves and other unpleasant surprises.
Keep your funds safe
In today’s world, it’s not enough to bury your money in a jar under a tree to protect it from ill-wishers. Only according to official data of the Central Bank of the Russian Federation, in 2018 hackers stole almost 1 billion rubles from Russians, and every year this figure is growing. But how many such thefts are not taken into account…
The more we switch to non-cash payments, the more in danger our money is. Previously, people carried a small amount with them in their wallet, the rest was stored in a safe place or in a bank. Now hackers hack bank cards by the thousands and get immediately to large sums. Keep some money in cash, and for cards and e-wallets, come up with strong passwords.