How to Manage Your Money
Believed tobe like a drug, money can be addictive. As your income increases, so does your spending. A lack of education on managing money is one reason many people are faced with financial dire straits today.
No matter what your age or income, there are two basic rules that everyone needs to know. Those rules are simply, pay your living expenses - the necessities - first, and only buy what you can afford to - not what you want to spend.
The First Rule of Money
Don’t buy what you can’t afford. This is a simple rule, but somehow few people understand how to follow it. This is because we overestimate what we can afford. Some suggest that you should always have at least six months of living expenses in the bank for safety in case you lose your job. This is a good rule, but what constitutes living expenses?
Living expenses are necessities. Necessities include your rent or mortgage, utility bills, car payments, taxes, and certainly food. It does not mean that great pair of shoes you saw in the window, a new flat screen television, or a trip to the Caribbean. The term necessity also assumes that if the worst happens and you do lose your job, you will immediately eliminate the extra niceties that you can no longer afford.
Losing your job may mean having to do without the ‘optional extras’ like mobile internet services, call forwarding or redial on your land line. Television cable services are another area where considerable savings can be made by choosing a cheaper package. Read the fine print on your service contract before doing anything. Sometimes costly penalties may apply, and you need to avoid those if at all possible.
Emergencies such as ill health, your car breaking down or roof leaking have to be catered for as well. You need to be able to have your health attended to, drive to and from work safely and live comfortably in your home, and these must be considered when saving money as well. Most important is not to waste your emergency money on luxuries or things you don’t really need.
Rule Number Two
Rule number two is to pay your bills before you start spending your money elsewhere. If you take something and don’t pay for it, it’s theft. Not paying your bills equates to the same thing, although it may not be treated the same way.
We are bombarded daily with images of material things, and actively encouraged to ‘live up the Joneses’ and buy the latest and greatest. Unfortunately, doing so does not make us the greatest. It just means that they walked into a store and bought something. Who cares?
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