5 Important Steps to Manage your Money Better

5 Important Steps to Manage your Money Better

by 5paisa Research Team Last Updated: Dec 10, 2022 - 06:11 pm 138.1k Views
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Creating wealth over the long run eventually boils down to managing your money better. You quite often find that people with the same level of income end up with vastly different amount of wealth just because one plans his savings and investments better. Are there any steps to manage money better? Yes, here are five such steps.

Make a budget

This is the first step if you want to manage your money better and prioritize your cash flows. A budget is not just a document or report but it is a control point for all your outflows. You will be surprised that when you make a proper budget and rethink on your flows, a lot of opportunities may actually open up for you.

Extract maximum savings

There is no point complaining that you are not able to save enough. You need to extract savings out of your income. Normally, we tend to look at savings as the residual amount left after meeting our expenses. That way you will never be able to save much. The best way is to set a savings target and then work your expenses backward. You will then figure out that you are perhaps spending too much on transport or eating out and they are not adding any value. That is how savings are extracted. Check for bargains and online offers to reduce your outlays.

Make your money work hard

The best way to manage your money better is to make your money work hard for you. This could have different implications. Firstly, you must ensure that you increase savings regularly in tandem with rising income levels. That is how you graduate to a higher level of wealth creation. As mentioned earlier, set targets and work towards these savings targets. Secondly, don’t waste your long-term savings in bank FDs. You need safety but you also need money to grow. So, invest your money to see it grow in the long-term.

Take professional advice

Financial advisors have an important role to play because they bring knowledge of best investment products, understanding of your financial needs and the ability to design the best financial solution for you. Creating a plan and monitoring the same is too complex to be done on your own. Seek professional advice because they add value in the form of expert insights and best practices, which you may not be aware of.

Monitor your allocations

Monitoring is not just about changing your investment mix or revamping your portfolio. You can actually monitor, do a detailed review and conclude that no change is required. The idea of monitoring is to check if your own needs and goals have changed. Monitoring also helps you to measure if your investments are in line with your goals and your intermediate milestones. These are question which only a thorough monitoring plan can help you answer.

There is no rocket science about managing your money better. Get diligent, get meticulous and get into the detailing. The rest will follow!

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