10 Principles for Managing Your Money
Managing your money can be quite daunting. But financial planning really boils down to a few key ideas, some of which are so familiar they sound so cliche. Yet knowing is not the same as doing. Most personal finance experts and financial planners agree on these principles. They just differ on their strategies and financial vehicles. Here are "10 Principles for Managing your Money":
Principle #1. You won't get anywhere if you don't know where you're going. A major mistake people make when it comes to their finances is they don't set their goals. Don't invest just for the sake of investing. Or buy insurance just to get the pesky insurance agent off your back. Link everything to what you want in life.
Principle #2. It's not how much you earn, it's how much you get to keep. It's common for us to say: "If only I earn more money" or "If only I was born rich". But wealth is not the same as income. You can earn a lot but spend more than you earn. Or you can earn a modest income but save and invest aggressively.
Principle #3. A little goes a long, long way. Oh, you hardly spend for anything, do you? So where did your money go? Small expenses here and there pile up. But it also works the other way around. Even if you just invest a small amount of money, but if you do it regularly and early enough, you can make millions in due time.
Principle #4. Live within your means, then increase your means. Spending wisely to keep your expenses low is a good thing, but at a certain point, it can only do so much. You also have to find ways to increase your income if you want to improve your bottom line.
Principle #5. It may not happen, but it can. You don't blink when you have to pay for car insurance. Yet, you put off buying insurance for your life and health. Doesn't compute.
Principle #6. You first, then others. Who do you work for? It seems many of us work for others, and I don't mean our family. We pay the government, banks, credit card companies, utility companies, and others first before we set aside anything for savings and investments for our own future. It's time to start paying yourself first.
Principle #7. There are two things certain in life -- death and taxes. We put off preparing for death because it seems so distant and, right now, unlikely. And we just accept paying taxes because, in most cases, we have no choice. Denial and acceptance. But we should, and can, do something about both.
Principle #8. Match the right instrument with the right requirement. Before you invest, buy insurance, pay for a preneed plan, or get into any financial product, make it clear to yourself what exactly you want out of it. Then choose the right product based on what your need is.
Principle #9. Make a life, not a living. Managing and earning your money just to accumulate more money for the sake of it is a tragic way to live your life. Financial freedom is about enjoying the good things in life, such as enjoying your family, learning new things, and pursuing your life mission.
Principle #10. The more you give, the more you get. Many wealthy and successful people believe not just in giving back, but in getting back what they give, and then some.
In the succeeding weeks, I'll discuss each principle at length and show you step by step how to do your own financial plan.
