How to Spend Your Money Effectively – The Art of Proper Financial Planning

How to Spend Your Money Effectively – The Art of Proper Financial Planning
  • Opening Intro -

    Money is something that you always use, but have you ever thought about its origin?

    Well, the United States has been in the money making industry since 1792.

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The earliest money as you know it today was in coin form made of precious metals and had actual value.

Due to coin shortage and the need to improve, the Treasury Department generated paper money – cotton in the real sense – during the Civil War in 1862. The Americans then started hoarding the valuable metal coins as a preventive measure against the money fluctuations that the war created.

Budgeting for Your Money

They say failure to plan is planning to fail, and that proves true when it comes to handling money. Some income earners usually complain that their money disappears without any tangible proof of how they spent it. You may not fall prey after reading this if you practice what you will learn.

Create a financial plan for whatever amount you earn and you will not have any money trouble in your life. Budgeting is an effective way of balancing your expenses with your income. In this case, take note of your monthly spending using a simple diary, excel sheet, desktop, or mobile app.

Once you have budgeted for three to four months, you will find out that your expenses fall into three categories including essential, entertainment, and discretionary.

Before you start spending, set aside 10 to 20 percent of your monthly salary as savings. Your money will grow significantly if you start saving early. Additionally, take advantage of the compounding power to ensure that your money does not lie idle by saving your money in a fixed account.

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Choose the Right Insurance and Investment

The primary objective of insurance is to cover the risks you encounter. Thus, do not confuse insurance with investment since they are two different entities. Life insurance is available in three categories that include term, traditional, and market-linked insurance plans.

While term plans offer great cover for small premium, traditional plans including moneyback and endowment policies offer low rates of return and high premium cover. The market-linked insurance plans have a 5-year lock-in period and offer a low premium cover, but provide market-linked returns. Other insurance coverage to consider include health and accident disability insurance.

While most people spend much of their energy and time trying to earn more, it’s crucial to understand that without the knowledge of the art of budgeting, things may lead to a non-promising future. This is because money plays a vital role in life as a tool of wealth accumulation for future needs and serves as a transaction instrument to meet the present needs.

Hence, proper financial planning and investing will assure you of a happy life while still working, and a stress-free one when you retire.

Please share this on Facebook to help your friends and loved ones learn how to manage their money.

Consumer Tips reference:

lower monthly bills guide

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Categories: Financial Planning

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