Financial lessons should be taught from an early age but in practical life situations this does not happen. Children from an early age are given financial liberty and they grow up without understanding the basics of personal finance. As a result, many people do not know how to save and how much to invest for the future.
Over the years many people learn financial lessons from the age of earning income and they ignore financial lessons that financial situations teach them. Here in this article, we discuss the important financial lessons that you overlooked.
- Control your money
- Talk about money
- Living within your means
- Prioritize your spending
- Smart saving
- Track your money
1. Control your money
Many people think money is needed to live but that is not true. Money is needed to fulfill your wishes. A person may have greedy wishes and other personal desires only the basics of life. In such cases money in use is different from person to person. If you have the ability to control your money and save money for what you want in life then you can live a happy life.
If you are unable to control your money and do not know how to prioritize your money then you will always be in search of money. Understand your emotions and feelings and how money can fulfill your wants and needs.
If you are able to control your money then you will live a contented life. Controlling money is not a one-day task, all you need to do is a day-to-day practice to control your money and once you know how to deal with this you should never stop.
2. Talk about money
To think about money is easy but to talk about money is hard. This is especially true when you are talking about money with your spouse, parents or relatives. People make judgments and calculations when you talk about money.
They do not understand that money is a number theory. Financial discussions happen during a financial crisis but talking about money should happen even during non-financial crises.
Learn to discuss money so that it can reduce taboo, frustration and financial arguments. Talk about a money plan to reach your goals with money. Set a date in a month and discuss your expenses for the past month and plan for the next month.
Financial conversations will heat up and turn into arguments, judgemental discussions, abuse and hatred may rise up. Talking about money is not as easy as it sounds. Your goal is not to argue but find out a way in which you can plan better money decisions.
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3. Living within your means
Living within your means is to change your lifestyle according to the income that you earn. Financially successful people always live within their means. When you live within your means you live a stress-free lifestyle. Spending habits should be aligned with your budget.
Monitor your spending and align it with your budget amounts. Evaluate how to allocate your money towards your wants and needs. Prioritize your income towards basics of life and differentiate from luxuries. Reduce unnecessary spending on desires that you cannot afford. Spend only that much which you have earned.
Budgeting is the art of allocating income towards your expenses. What are important expenses and what is less important an individual should distinguish between them and allocate funds towards it. Financial success depends on preparing a balanced budget and managing your money effectively.
Budgeting on a monthly basis will be effective as you can allocate your income towards monthly expenses. When you are planning your long-term goals, have a long term vision and allocate funds in small proportions to achieve long-term goals.
5. Prioritize your spending
How do you want to spend your money in that way you can prioritize your income. If traveling is your life priority than other goals then allocate funds towards traveling. If child education is your priority, allocate funds towards children’s education and make investments in your child’s future. But remember to spend first on the basics of life.
If you are living in a rented apartment then your first priority spending money will be towards allocating funds towards rent. Similarly for the food and clothing. If you have met your basic priority needs then you can plan for other goals which are prioritized according to your lifestyle.
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6. Smart saving
It is said that saving is an art and to save money you should not stop spending money. Making savings should be from spending money. How smart you are in saving money when you are spending money. Have clear goals and make a plan to achieve them.
Look out for the best deals and spend your money wisely. There are many online platforms where the companies offer different promotions and deals to attract customers. Be the one among them to spend and save smartly. Many people because of their spending habits & product addictions do not look into these offers and they spend without any savings.
7. Track your money
Tracking your money is very important as it will help you to know where your money is going. Start your search with where your money is going towards. Every individual has basic spending necessities and luxury spending. Prioritize your goals and see if your money is going and falling into the same bucket you have allocated towards.
Tracking your money will help you to know if you are staying on the right path or not. Many people spend their money but they do not track how much they are spending on their allocated desires. If you are spending less or more it can be corrected only when you track your money.
Every individual has different goals, different lifestyles and needs. There is a single rule or guideline which is universal and applicable to every individual. All it requires is dedication and allocation of funds towards each category of spending and tracking them. Every financial crisis will teach a financial lesson. We should learn lessons from the financial situations and not repeat the mistakes.
About the author
Vinay Kumar Goguru is a finance professional with more than 8 years of diverse experience as a researcher, instructor and Industry work experience with both public and private entities. Prior to MyMoneySouq, he spent 6 years in Berkadia, It's a commercial mortgage banking company. He has a "Doctoral Degree in Commerce" and two master's degrees with a specialization in Finance, one as Master of Commerce and other as Master of Business Administration. He has written several articles on personal finance, published by different International journals. He loves traveling, reading and writing is his passion. He has a dream of writing a book on his favorite finance topics.