People use their intelligence to learn skills and acquire knowledge. Often the process of learning is dull. However, everyone likes the subject of money. People dream about it, spend it in reality and in imagination, earn it, and all too often watch it slip through their fingers like water. However, as you increase your financial IQ, you will have a better chance of controlling your money and your future.
How-to-get-rich books have been around forever. There seems to be a new one coming out every day. Financial advisers compete for the privilege of guiding your investments. Radio talk show hosts offer free advice to those who phone in. People counsel you to get out of debt, show you how to make pennies go farther, teach you how to make money in the stock market, and show you how to avoid paying taxes.
Assuming you have some money to manage – whether from a paycheck, a government check, or even an allowance – you will need a plan and self-discipline to succeed in getting the upper hand over your finances. People who spend their money as fast as they get it are not in control.
A budget will help make whatever money there is go farther. Categorizing expenses and allotting income to these categories (with savings thrown in) is the first step to even understanding where your money goes. Good management can make any amount of money go farther. Sometimes people who think they couldn\’t save a penny are surprised to find that they can save ten percent of their income or more.
Many people go through life without a clear idea of income and expenses. They have cash flow, they just don\’t take the time to understand it. This is a serious mistake which can cost thousands over the years. The very first thing is to list expenses that are recurring: rent or mortgage payments, utilities, alimony payments or child support, and such \’fixed\’ expenses.
Confusion is usually far worse in the area of \’discretionary spending\’. Sometimes income is gone the same day it\’s received. Your goal should be to know where the money is going and then allocate it in advance, so impulse spending doesn\’t deplete funds that should go to things like clothing, recreation, or savings.
Everyone should be able to save at least a part of every check. Having an emergency fund means that unexpected purchases – like a new tire for the car or a new blouse after one is ruined by spaghetti stains – won\’t have to be paid with – gasp – credit. Buying on credit is something most of us need to avoid like the plague, since it makes everything cost more in the end.
Budgeting and saving are the foundation for money management. Plan and act proactively rather than reacting to each new impulse or money crisis. Once the foundation is laid, things like investing follow. Learning to make money work for you rather than for someone else – like a creditor – is key to success. Proceeding step by step to sensible goals is the way to financial wisdom.
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