Money management for self

There is no correlation between the skill of making money and managing (keeping) money. If there is one there would be no bankruptcies. Every one of us heard stories of actors, sports stars, and even industrialists, who were once rolling in wealth but are struggling today.

Most of us feel one can become rich by making lots of money, so that is where one directs all efforts. But one should also be able to keep (manage) a lot of money.

Making money requires knowledge and experience in occupation. A good Doctor, for example, is not only well qualified but has also treated many patients. Managing money requires a different set of skills: discipline, self-control, focus, continuous review and monitoring among other things. Making money takes specialized skills, but managing money takes common sense.

A smart person should know how much money he has in savings bank account by tracking it in his mind and maintain a parallel bank passbook. If an individual has to depend on the bank to tell how much money he has or he needs to check balance on the phone, online, or in passbook, it means he is depending on bank telling him his balances. Think about it for a minute: should they be telling you, or an individual who is a good money manager should know the figures himself. A good money manager is one who tells the bank how much money s/he has in his account with the bank, and not the other way around.

The first step is to track your transactions yourself. Get into habit of keeping your own bank and credit card records. This is easy: most salaried people would have three to four credit transactions a month in their bank account, and 10-15 debit transactions. Whatever the number of transaction, keep a parallel bank statements into personal passbook. The same goes for credit card transaction. Over time, learn to track every aspect of finance including investments, tax payments and property documents.

The next step is self-control. Credit card companies earn money because people make impulsive purchases. A “sale” is never a good way to save. Wq ealth creators follow the formula, “advance investment and postpone expenses.”

Pay yourself first. Only a small portion of what one earn is ours. Most of our earnings are used to pay others, in the form of taxes, rent, EMIs, routine expenses, and so on. One earns then spends and if anything is left, one save. But it is wiser to earn, save (pay yourself) and then spend.

Most of us focus our entire career on earning. One should review his finances and spend few hours a year (an hour every quarter) reviewing financial goals, family budget, financial transactions, and investments.

Becoming wealthy is not a matter of how much one earns and from whom wealth is inherited parents or relatives or what one does but it is a matter of managing the wealth or earned money properly.

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  • Durgamohan

    A thought provoking article, even though no quick fix solutions are provided. The concept explained very well

  • deep

    its somthing general but worth considering…very nice