Handling money. How to handle money correctly?
12/24/2015 4,663 3 Reading time: 10 min. Rating:
Author
: Konstantin Bely
I bring to your attention another article about how to handle money correctly and competently. The Financial Genius website already has a large number of publications on this topic, so I decided to write another one, firstly, for those who have recently joined the number of readers and are viewing more recent posts, and secondly, I came up with an idea on how to format it like this: so that it is remembered well. So, what should proper handling of money
I’ll start with the most important thing, which I have already written about several times:
You need to treat money like finances! Forget the word “money”: you now have “finance”. That is, something that can and should not only be earned and spent, but also taken into account, redistributed, saved, etc. And it’s even better if you have not just finances, but capital - finances that are invested in certain assets and generate income. You can read more about the difference between these concepts in the article Personal Capital: Money Must Work.
Well, now remember 5 verbs that talk about how to properly handle money:
- Consider!
- Control!
- Save!
- Save!
- Invest!
Please note that I don’t even mention such basic things as “earning” and spending; I think this is already clear to everyone. But I will now describe these 5 rules that distinguish personal finance from money in a little more detail.
Rule 1. Take it into account! In simple terms, count your money: know how much you earn and how much you spend, when, where/where and how much of your money comes and goes. Handling money correctly is simply impossible if you don’t know these basic points - don’t you agree?
Nowadays, accounting for your money has become much easier than it was some 20-30 years ago: convenient technical capabilities have appeared that allow you to automate the accounting of personal finances. You can read more about them in the article Home Accounting.
Rule 2. Control! To handle money wisely, you must not only know how much money comes and goes, but also keep these processes under complete control. First of all, this concerns expenses: no matter how much you earn, as soon as you start spending money uncontrollably, it will all start to go away, and in especially severe cases, debts can even form and accumulate. Here, too, home accounting will be your faithful assistant.
Rule 3. Save money! Controlling expenses and saving are not exactly the same thing. And even more so, there is no need to associate saving with greed or anything else negative. Saving is a thrifty attitude towards money and personal finances. “Saving” means “saving” your money - is that bad? Smart savings allows you to spend less money on all necessary goods and services than without saving. You can read more about this in the article How can you save money?
Rule 4. Save! This is where it gets more interesting. If you take into account, control and save your expenses, you will have free money. They can and should be accumulated, distributed into different funds and each of them used for its intended purpose. What are these funds?
- Reserves are a well-known “financial airbag” that you can spend in the event of force majeure situations. If you do not have reserves, any force majeure will inevitably lead to the formation of debts and significantly worsen your financial condition.
- Savings are funds that you will accumulate for various large expenses - those that you are not able to pay through regular income to your personal or family budget. It is with the help of savings that financially literate people acquire expensive household appliances, furniture, cars, carry out repairs, arrange vacation trips, etc. For the financially illiterate, all this comes from loans, and is much more expensive.
- Capital is the most important of a person's funds, which only a very small percentage of people can boast of having. But if it is present, this can be regarded as a very big advantage, since capital creates new sources of income, increasing budget revenues. Moreover, in most cases, this is passive income. Having personal capital, a person becomes a private investor and begins to earn money not with his labor and time (which are always limited), but with his own money, forcing it to work for himself.
For more information about these three funds into which accumulated money should be distributed, read the article Human Monetary Assets. And even if you don’t have capital yet, reserves and savings should definitely be present.
Rule 5. Invest! Well, if you have capital (and you need to strive for this), then you should think about where to invest it. This is the most complex rule, but without it, handling money cannot be called absolutely competent and, if you like, complete. Yes, you can live your whole life on active income without worrying about your future, but what will await you later when, either due to age or due to some force majeure, you lose your ability to work? Pension?
Of course, investments are always associated with risk: any investment of money, even if it seems the most reliable, always involves risk. Moreover, risk and profitability are very strongly interrelated: to obtain a high return on investment, you will have to take more serious risks. But look at it from the other side: when you don’t invest money anywhere, you also take a lot of risk. Because they are gradually “eaten up” by inflation and devaluation, which, as we see, can be no less serious than investment risks. So compare: take risks in order to gain income, or inevitably lose money? I think the conclusion is obvious.
I recommend reading the large article Where to invest money?, which discusses the features of all key investment options.
Remember these 5 rules again. They are the ones who talk about how to handle money wisely. And not only remember, but also try to start applying them in life, even gradually. I am sure that soon you will feel how your financial situation will begin to improve, even if your income level remains unchanged.
Take care of your personal finances and handle them wisely. Handling money correctly never hurt anyone. Until next time, see you on the pages of the site!
Estimate:
Spend more than you earn
It would seem that this is just a matter of common sense. Alas, this is not true. If everything were so simple, we would never live in a crisis. Here we are talking about a fatal mistake and even a habit that will ultimately lead to complete financial collapse. The worst thing is that temptations await us at every step, for example, credit cards, they come to us easily and encourage us to spend more than our financial capabilities. We can name a lot of other services as networks placed along our path. There is only one salvation: curb your desire to spend more than you have, control your budget and your expenses. “Before you spend, you need to earn.” William A. Ward
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What is the significance of the hand
To make money, you need to take and give money with different hands. This rule is not of key importance. Much more important is a person’s attitude towards his own wealth, his attitude towards material wealth. Exchange coins should be valued, but not overvalued, exalting their meaning.
How to take money with your hand
If money is lent, you can only take it with your left hand: this way a person will express his own good attitude towards the borrower and show respect for banknotes. If the transaction takes place in the evening, you cannot transfer banknotes from hand to hand. You need to take money from any surface, avoiding contact with parts of the body - esotericists insist on this. They believe that during direct transmission there is an exchange of energies, which is unacceptable due to the imbalance of the Universe.
Which hand should I give the money with?
It is better to repay debt with your right hand, because it is connected with the mind and consciousness. A person must have pure thoughts and, in addition to handing over the bills, express gratitude to the borrower. If money is borrowed from a bank, a simple trick will help improve your financial situation. All you need to do is add a few coins to the amount you need to deposit into your account. Overpaying will magnetize luck.
Differences for left-handed and right-handed people
The basic rules change greatly if a person is left-handed. It is not his left hand that itches for money, but his right hand, and accordingly, he needs to use it to take money, receiving a salary or borrowing money. The left hand, on the contrary, should be used for calculation. You can give her money when shopping in stores, or pay off debts.
Attention!
If a person is ambidextrous (his hands work the same way), he does not need to adhere to such rules. He is able to grasp the financial flow with both limbs.
Don't plan your budget
Planning is an absolute necessity for your finances. Financial goals can and should include: your retirement plans - what will be saved for the future, the intention to pay off debts as soon as possible, investing regardless of whether your income is high or low. “Make sure you have a plan for your life, which includes a financial plan and your mission to implement it.” - Manoj Arora
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Many of us live dependent on a single source of income, and we are even very happy to receive a salary on certain days of the month. Even those of us who run our own businesses or are self-employed typically rely on one income stream. This could lead to absolute disaster. Regardless of how stable and impressive the income is, it is worth thinking: what will happen if this source dries up - you never know what problems happen in life? And then it will turn into financial problems.
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