Do you feel that you’re not saving enough?
Do you find your bank account empty by the third week of the month?
Do you wish you could earn more money while you slept?
Here are 7 money management secrets from the Richest Man is Babylon to help you take financially sound decisions.
1. A part of what you earn is yours to keep
When your salary gets credited, what do you do? Pay your rent, emis, buy groceries? And by the time you think of saving some money, you realize it’s all gone. This is where the concept of “Pay yourself first” comes in handy.
Before you pay your bills, you should keep aside one-tenth of your income for yourself. This habit will help you save automatically, and also reduce your tendency to spend money on frivolous desires.
2. Learn to separate your needs from your desires
You might feel that you can’t live with only nine-tenth of our income because we do not differentiate between our needs and wants. You need food to eat, clothes to wear, a house to live in and probably an internet to read this but you don’t really need to go out every other night to eat. You can cook indoors some days.
You can avoid buying those extra pieces of clothes that you probably won’t even wear one year later. Curbing your desires will help you focus on what is necessary for you. It doesn’t matter how many tempting messages Zomato and Swiggy send you.
This doesn’t mean that you should not have desires. What’s the point of living then! Have your desires but having a limit will help your money management skills in the long run.
3. Secure an income for your family in case the worst happens
2020 was probably one of the worst years that we have seen. People were locked in their homes, some didn’t have access to food, others found themselves out of a job, some lost their earning members of their family. In short, life (like Game of Thrones) is unpredictable. Therefore, you must always be prepared for the worst case scenario. Money management means having a rainy day fund or life insurance that will protect your family from any financial woes.
4. Seek advice from those who are experienced in matters of money
If your dream is to be a cricketer then you wouldn’t ask for tips from Ranbir Kapoor. Or if your dream is to be an actor, you wouldn’t knock on Rohit Sharma’s door.
Learn from the lives of people who started from scratch and built their wealth. Read about them, listen to their interviews, and try to develop a thought process that matches their’s. Do not believe in every advice you get from your friends, family or strangers on the internet. They do care for you but they might not be the best qualified people solve your queries.
5. Learn to Earn while you Sleep
You spend 10 hours a day working to earn money. But what if you could earn more money without putting any extra effort?
Money doesn’t grow on trees. But it can grow if you invest it. These days, there are numerous options like bonds, mutual funds, gold, shares etc where you can invest your money and earn decent returns. Depending on your risk appetite and your duration, you can consult a financial advisor to help you earn while you sleep.
6. Guard your Money from any kind of Loss
In 2008, the American stock market crashed by over 700 points. Those who had invested all their savings in the stock market suddenly became bankrupt. Some even committed suicide. A similar trend followed in 2020 when the pandemic hit us.
If those people had kept an emergency fund or diversified their investments in options that weren’t too risky, they would have guarded their money. The first rule of batting is to protect your stumps. Similarly, first rule of money management is “Never lose money”. And the second rule is “Never forget Rule No. 1”.
7. Invest in yourself
One way to earn more is to improve your ability to earn. Being stagnant will limit your earning potential and minimize your chances of getting rich early. You could do a course, read a book, learn from your friends or any way you find comfortable. Once you develop new skills, you are automatically more valuable to your firm. Hence, they would be more likely to pay you more to retain you!