Financial Planning Lessons Everyone Can Use
You might be earning very well but if you are not managing your money properly, your finances will be in pretty bad shape. To improve your finances, you will have to plan your personal finances very well. Personal finance planning means you use your money based on the priorities. Paying for essentials like rent, grocery, utility bills are mandatory, likewise setting funds for savings and investment are also mandatory. With proper planning, you can easily plan your money.
How to Maximize Your Savings With Cashflow Management?
Cashflow is a term used to describe your income and expenses. Cashflow management means you manage your income and expenses. Cashflow management allows you to have surplus money every month and you use your surplus money to build your savings. Cashflow management helps you to maximize your savings. It all starts with creating a budget. When you create a personal budget, it will be easier to manage your money. Budget allows you to know how much you are making and how much you are spending. If your income is low, you will have to focus more on improving your income and if your expenses are high, you will have to reduce your expenses to save more. Budgeting is very important for Cashflow management, you can set how much money you want to save in your budget. If you strictly follow your budget, you will be able to save money on a regular basis. For example, you can set 5-10 percent for saving. The point of making budget for cashflow management is you strictly follow it (keep your expenses under control) and save something every month.
How to Start Building Investment Funds Through Cashflow Management?
The primary aim of cashflow management is to have positive cashflow. In other words, your expenses should be lower than your income and your cashflow is positive. When your cashjjflow is positive, or in other words, you are left with some money, you can use that money to invest. If your income is small, your surplus amount will also be small, therefore, you might not be able to invest it, however, if you manage to build a positive cashflow every month, you will have enough money to start investing. If you make personal budget as a part of your cashflow management, you can even set investment funds in your budget. Alternatively, there are also micro investment platforms where you can start investing with small amount. Therefore, if you can manage to save just $5-$10 in a month, you can use micro investment platforms as well. You might not get a great return with $5-$10 but if you are doing it as a long term strategy, you can build sizeable portfolio. Cashflow management skill is a great skill to build investment funds.
How to Build Liquid Assets
Liquid asset means the assets that can be easily converted into cash. Investments or assets that can be converted into cash offer a lot of benefits in personal fianance because you canb have cash in a short notice. As opposed to liquid asset, you can also build fixed assets like house but building liquid assets is better for your personal finances because whenever you need cash, you can get cash immediately. You can also save cash and might get better returns with fixed deposit bank account but cash can lose value when the country increases interest rates or when there is inflation. Therefore investing in liquid asset is better than saving cash. You can even invest in liquid assets as your emergency funds instead of saving cash as your emergency funds. Likewise, you can also continue to build liquid assets as your retirement funds or your financial safety nets. You can start building your liquid assets by investing in liquid assets like stocks, gold, crypto, etc. You should continue to invest in these assets to build your assets.
Liquid Assets Vs. Fixed Assets: Which is Better For Your Finances
A house is not a liquid asset as you cannot sell your house immediately. However, your stocks are liquid assets as you can sell your stocks immediately. Gold is also liquid assets as you can easily sell your gold assets. You need to build liquid assets as well as fixed assets to improve your finances. That’s because when you have liquid assets, you can convert it into cash at any time and use the money for whatever reasons you have. Fixed assets are more stable compared to liquid, since liquid assets can be easily converted into cash you end you losing your liquid assets pretty soon but you cannot sell your fixed assets immediately, thus, it offer better financial security. Liquid assets and fixed assets both have equal importance in your personal finance and you should give equal emphasis, you should not choose one over the cost of another. One of the major drawbacks of liquid asset is you can sell them whenever you want and sometimes during emergency situation you end up selling for lower value and might make a loss.
How to Save More With Limited Income?
Saving is impossible with limited or small income, right? Well, that’s where it goes wrong when it comes to saving. Saving is not related to how much you are earning. As long as you are making money on a regular basis, saving is always possible. With limited or small income, you might not be able to save a lot of money but you can of course always save something with whatever you are making. The best approach to saving is cut some percentage of your income for savings, then try to maintain your life with the whatever is left after saving. This approach ensures that you save something whenever you receive payment and maintain your life with the remaining amount. This strategy of saving money before you spend money, instead of trying to save what ever is left after spending money, is a better strategy. The best thing about this saving strategy is that you can drastically cut your expenses as you have limited money left to pay for bills and other expenses. This strategy is best for financial stability.
How to Overcome Temptation to Build Your Finances?
I don’t have a car and I want a car badly. Whenever I see a car that I want to buy, I feel very unhappy. If I want, I can actually get a car loan to buy the car. But I know you cannot have everything in life, and you should only get things that you can actually afford. If I buy the car with a loan, I will not only have to pay loan with interest but also spend money to maintain the car. I am sacrificing my current happiness so that I can enjoy my life later in life. If you want to build a better finances, if you want to become financially secure, you need to over come the temptation. You should avoid buying things that you cannot actually afford, and avoid things that will require you to spend a lot of money for maintenance. Temptation is one of the prime reasons why people spend a lot of money on things that they do not actually need or spend money on non essential or useless things.
How to Choose the Right Career For Better Financial Future?
If you listen to career coaches and career guides, they you usually tell you that you need to choose a career that you are passionate about? They will frequently tell you that if you choose a career you are passionate about, you have higher chances of becoming successful. They tell you the choice of career should be always based on interest and passion. However, I find fault in this line of thinking. Instead of passion, you will have to choose a profitable career. A profitable career means a career that is likely to make you good money so that you have a better financial future. Let’s say you are passionate about teaching, based on career counsellor, you should be choosing this career. However, teaching is not profitable career. Would you like to struggle with finances all your life? Likewise, you might want to study philosophy but can you make a decent living as a philosopher. If you are placed in a career where you do not earn well, end up with financial difficulties and a lot of dissatisfaction in the family, and live a miserable life because of money problems.
Insurance is the Best Way to Manage Your Personal Finance
Generally speaking, there are two major benefits of insuring your assets (non life insurance) or your life (life insurance), one, you will get financial protection in case your assets like your house and car gets damaged, or your life is threatened with accidents or diseases. Insuring your properties, your life, your assets, health, even insuring your travel or transportation of goods, or even flight tickets will provide you safety nets as you will receive money to recover from the damages. Since you get help when you need most, for example, you need surgery and insurance will cover your medical bills. When you have insurance, your will recover from all kinds of crisis in life. That’s why insurance is considered one of the best tools to manage your personal finance. Interestingly, you can also use insurance as a way to build savings. For instance, if you have term life, you pay premium for certain number of years and at the end of term you get back your money with insurance bonus. You can use this money for your meet your personal finance goal.
Importance of Having Fixed Deposit Bank Account
You need to save money for various purposes but sadly saving money does not actually make you a lot of money. You will have just the principal amount. If you are smart enough to save in saving account, you might get returns on your savings, but still it is very small amount. You can multiply your money if you invest. If the market is favourable, you can even grow rich over night. However, investing does not always give you great returns, in worst case scenario, you might even lose your money. So what is the best approach? Well, fixed deposit bank accounts can be the answer. Fixed deposit bank account is a saving account with high returns. You will get 2X or more returns compared to a normal saving account. While the returns might still be less compared to returns from investment but technically speaking, unlike investing fixed deposit bank account has zero risk. You receive guaranteed returns. Actually, you can build passive income with fixed deposit accounts, if you compound your returns, you even grow your wealth.
How to Build Additional Income With Savings
If you save $100 in your safety locker at home and if you withdraw the money after one year, you will have just $100. Interestingly, one year later your $100 might even lose value if your central bank increase the interest rate or if there is inflation in the country. If you keep $100 in a saving account in a bank, depending on the interest given by the bank, you will have more than $100. In our country interest rate for saving account is 4 percent, therefore, by keeping $100 in a saving account in a bank, I will have $104 after one year. Well, inflation certainly deflate the value of $100 but I will have more than what I initially deposited. Instead of a normal saving, if I kept my money in a fixed deposit bank account, I will have more money. In our country, the interest rate for fixed deposit bank account is 8 percent, so by the end of one year, I will have $108. Savings can build additional income for you if you know where to save your money?