It is said that money is a good servant but a bad master. Do you let money control you or have you found a way to master money and make it work for you? Mastering money is not as difficult as most people think. You just need to understand certain principles that guide money and be willing to apply them. This is the secret that the rich know that the poor don’t. If you’ve been doing the same thing over and over again without getting results then you should understand that it is now time to change your strategy which is why I want to share with you 5 concepts you need to learn to master money!
Number 1: Tracking Where You Spend Your Money
You can’t master money if you don’t know where your money is going. People complain every day that they don’t have enough money but they don’t ask themselves where they are spending the money they do have. The first concept you need to learn to master money is to track where you spend your money.
I know it sounds like hard work for you to be tracking everywhere you spend money in a day but that is the essence of tracking it. You must be willing to work hard in order to master your money. And this includes tracking every detail of how you spend your money.
The concept is to figure out how much money you spend and the things that you spend the most money on. You have to keep records of every dollar you spend. From the money you spend on groceries, to gas, internet, coffee, getting your hair done and of course your mortgage. The reason why you need to add the smaller amounts is that this money that seems little actually amounts to a lot over time. For instance, the $3 you spend on a cup of coffee per day amounts to $1,000 a year. Compare this amount to when you buy and make your own coffee at home and you’ll see just how much extra you’re paying for this convenience!
Tracking where you spend your money will help you identify what takes most of your money. And like the $1,000 spent on coffee a year you will soon realize that it is not worth spending too much money on these smaller expenses. By tracking, you can cut down your spending and increase your savings with little effort.
But what does it take to start tracking where you spend your money? The simple truth is that it only takes your willingness. You can start by getting a book where you write everything that you buy. And if you don’t like to do things old school, there are record-keeping apps on your computer or smartphone that can give you the same result. Microsoft Excel is a good option for those who want to leverage technology for tracking their expenses or you can use apps like Mint.
Number 2: The Power Of An Emergency Fund
How many times have you expected that your car will break down in the middle of the road? Or how many times have you expected that you will fall sick and be admitted to the hospital? How many times have you expected that your house will catch on fire or that you will lose your job? These are all emergencies and no one expects them but that doesn’t they can’t happen.
The difference between the rich and the poor is that the rich know that there can be an emergency and they start making plans for it. The poor also knows that there can be an emergency but they instead just hope they will never happen.
Life itself is a risk. You can’t tell what will happen in the next moment so you have to always be prepared ahead of time. No one can predict when a natural disaster will happen. We’ve seen cases where natural disasters like an earthquake made many become homeless within a day. Another example of unforeseen circumstances is the case of a pandemic which we’ve recently experienced.
To master money you must learn the concept and value of having an emergency fund. The first step to set up an emergency fund is to find out how much your living expenses are. Ideally, you should make plans to save 3 to 6 months of your monthly expenses as an emergency fund. Always save a certain amount of your earnings each month in case of an emergency.
Number 3: How Debt Impedes Wealth and How To Pay It Off
So many people still battle with debt today. The common source of debt is from loans such as student loans, car loans, mortgage loans, and medical bills. This debt is the reason most people have never mastered money. It is impossible to record financial success when you have debts. You have to pay off your debt if you want to master money.
Another way most people enter into debt is through the use of credit cards. It allows you to buy things that you want without money but it is not free. You will have to pay back later. And you are not just going to pay the exact amount because it comes with interest.
Debt is known to affect productivity and concentration. Most people who are in debt have to constantly battle with emotions of fear, anxiety, and panic. This in itself will affect your ability to make more money. You have to do all you can to get out of debt because it is possible to live debt-free. I am going to be showing you how you can pay off your debt and master money.
You have to understand that it is very easy to borrow money but it is often difficult to pay back. So the first thing to do to stay debt-free is to avoid it in the first place. I know this sounds difficult because sometimes we need some things but don’t have money to buy them. So borrowing money to buy these things sounds like a very good option at the time but it isn’t in the long term. The truth is that we can live without so many things that we spend money on. One way to avoid borrowing money to buy things that we can do without is to delay buying. Most times we buy impulsively, so giving yourself time before you make the decision of buying will allow you to see if it is necessary or not.
If you are already deep in debt, the fastest way to pay off your debt is to develop a repayment plan. Most people who are in debt don’t have a goal to repay their debt and that is the reason why they are still in debt. Estimate how much debt you have in total and create a goal to pay everything off. That sounds very easy but it is effective.
If you want to reduce debt then you must cut your spending and also work with a budget. Don’t just spend your money the way it comes. Have a budget that will allow you to focus on the important needs first and always cut spending on anything you can do without. Another way to avoid debt is to live below your means. Don’t live your life to impress others. That way, you will be happy with yourself and also free from debt.
Number 4: How To Invest Simply and Consistently
One concept that all money masters have learned is how to invest. All of the world’s richest people today are great investors. Investment has become a habit to them and they cannot do without it. If you want to master money you have to learn how to invest as well.
One misconception that people have about investing is that you need to have a lot of money before you will be able to invest however this isn’t true. In fact, most of the wealthiest people today didn’t have much when they started investing. They started from little and I’m going to teach you how you too can start investing simply and consistently.
The first thing to do is to start investing from the little that you have. You have to understand that the money you invest is not lost but it is still your own. The little money you invest will start to yield interest and multiply. This is as a result of what is called compound interest. This means that if you invest $1,000 at a rate of 6% per annum it will become $5,743 in 30 years. Investing is not a get rich quick scheme so you must learn to be patient if you want to invest.
Always think of the long term benefits and not the short term gain. Make sure you do your own research before you invest in anything. Do not invest in anything that you do not understand and only invest what you can afford to avoid running into debts. Investing what you can afford is the key to consistent investing. When you invest what you can afford, you can easily leave it for a long time to yield more interest. You have to note that investments can fail so it is best to diversify your investments and not invest in one single asset.
Number 5: How To Resist Overspending
How many times have you gone out to buy something and you realize that you brought home more things than you had planned? Chances are you’ve done this before as we tend to spend more money than we should have spent in the first place. This is called overspending and it is as a result of impulsive buying.
To resist overspending and master money you have to plan ahead and have discipline. To avoid overspending, always delay before you buy things you don’t need. Ask yourself if you can do without that thing for a whole day. If you can do without it for a day, ask yourself if you can do without it for a week. When you ask yourself questions like this you will realize that most things that you spend money on are not necessary.
Have a budget for how you will spend your money. Make a list of everything that you want to buy and separate them into needs and wants. The easiest way to differentiate needs and wants is that you can’t do without needs but you can always do without your wants. Always buy things with a list. Don’t ever go to buy anything without having a list from home. This will help you reduce impulsive buying as you will have to focus on the things that you need to buy first. Also, you should only take the amount that will be enough to buy the things on your list. When you hold extra money in hand you will be tempted to spend it on extra things that are not necessary. So don’t keep too much cash at hand.