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Practical Tips for Better Money Management

Making the right financial decision isn’t exactly easy. There are taxes, investments, incomes, and a whole slew of other factors (and numerals) to consider. You might think something is a good financial investment only to realize too late that it’s not. In such a situation, you would want to be protected from financial damage. However, that in itself requires having made the right financial decision. To start a cycle of good financial decisions, it’s important to begin with the basics. Below are some practical tips to help jump-tart your financial growth.

Learn about Your Current Financial Standing

You won’t be able to improve your financial standing without fully understanding your current one. Go over all your financial statements to truly understand where you’re at. Find out how much your monthly expenses are (which includes everything from mortgage to utilities to food), what loans or debts you’re currently paying, and whether you have enough disposable income to go by. By fully comprehending your financial power, all the succeeding steps in this short guide will be easier to accomplish. Additionally, knowing how much you have can help you make better financial decisions, too.

Study Your Insurance

As mentioned before, you need to understand your current financial standing. That includes reading the fine print of your existing insurance plans. Most people often take the initial insurance as is and fail to realize that there are usually terms and conditions attached. This matters quite considerably, as the last thing you want is to not be able to take the money you put in because the insurance doesn’t cover your situation. Make it a point to always read the fine print. You’ll soon discover that auto insurance would have different terms and coverage compared with insurance for motorcycles. You might find that you have a set amount of years to pay off before your money can go back to you. In some arrangements, your medical insurance can only work if you’ve accomplished a certain number of payments. We need to know the information that’s often only included in the fine print to fully benefit from our insurance plans.

Set Up an Emergency Fund

emergency fund

While having insurance is all well and good, having your own emergency fund to cover you in tough times is one of the best things you can put effort into. An easy calculation for a base emergency fund is three to six month’s worth of expenses. Of course, this is assuming you’re aware of your monthly expenses. Three months is a good amount to start with, but saving up enough money to cover six month’s worth can make a considerable difference. Once you’ve created an emergency fund, it’s best to leave it untouched until an emergency arises. You’ll be thankful you put in the effort to establish one.

Get into Investing

Many experts often tout financial investments as the ultimate form of financial security. In a sense, it’s quite true. You’ll be putting money into an investment with an expected return a few years down the line, and how much you take out can depend on either the market fluctuation or the amount you put in. However, it’s important to remember that whatever form of investment you decide to get into, be it the stock market, mutual bonds, or even real estate, it’s not a guarantee. Investments come with their own risks and rewards that need analyzing and studying. That’s why studying investments is always a good idea. Learning how to analyze the market is another decision that will serve you well.

Diversify Income Streams

A salary is a reliable income stream, as it’s consistent. However, relying solely on your salary can prove to be a bad decision, especially in the long run. The economy remains volatile, and the job market is one that’s continuously shifting. Many companies are laying off their employees, which makes relying on a single income stream a very dangerous position to be in. Having other sources of income is one of the best ways to make sure that you won’t be at a loss of revenue, regardless of your job situation. Your secondary income source doesn’t have to be something large (but if it is, that’s a welcome addition).

Throughout all your attempts and the tips provided here, one thing is certain: you need to keep studying. Study and learn more about personal finance and how to make better financial decisions. Managing your finances better can only come from a place of understanding and education. Through self-education, you can eventually improve your life situation and can truly say that you have managed your money well.

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