What is the hardest part of money management? You are working and earning money, a well deserved income. You want to ensure that your money is managed properly so your efforts do not go to waste. You know that you have to put some efforts into managing your money that will involve financial planning, saving money, investing money or building wealth, budget planning, paying off debts, etc. You cannot achieve your financial goals by avoiding all these things.
Generally, financial planning is deciding what you do with your money and how to allocate your money. Budget planning may be part of it as well as investment planning. For some people, financial planning can be a huge headache and may decide to engage a financial planner for assistance. For most of us who are not perfectionists, we do our own planning, amending our plans often as we move on.
I have learned that plans do change when we constantly adjust to things that happen in our lives. When we get married and start a family, changing jobs, starting a business, supporting the elderly, etc. all these will cause our plans to change. Having a plan means being better prepared to face all these changes. The important thing is not to be afraid to modify your financial plans to suit your current situation. The future is “unknown” but being prepared means no or less regret later on if things do not turn out as well as expected.
Building wealth/Investing money
Personally I admit that this part of money management is the hardest for me. I am not a good risk taker preferring to park my money in safe, slow and steady types of investment like the Amanah Saham and the Unit Trust funds. On the other hand, I also tend to fall for high return schemes falling prey to my own greed. It is easy to accept advice about not putting all our eggs into one basket but it takes some guts to implement it. We are supposed to spread our money across various types of investments like stocks, properties, precious metals, bonds, etc. I am not averse to diversifying my investments but I prefer to do it gradually.
I have been keeping a monthly budget ever since I started to work. I am not particularly fussy about doing it and generally it shows where my money is going. It saves the trouble of having sleepless nights wondering where my money had disappeared to. When I run out of money to spend (no more budget), I prefer to stay home to avoid the temptation of spending money outside.
One thing that has worked for my family is being careful and taking care of our personal things or belongings. This ensures a long life usage avoiding wastage and unnecessary expenditure of buying new replacements. My children can use their school bags for two years without replacement and wear one pair of school shoes for an entire school year (well almost). My spouse does not mind doing preventive maintenance and repair work around the house to ensure things are taken care off and avoiding a bigger problem or costly repairs. It helps the budget and hence I can allocate more money for long term goals instead.
Paying off debts
It is hard to live without debts and most of us will have medium to long-term debts like a house loan or car loan. My spouse and I do not take debts lightly and pay off all credit card debts at the end of every month, so there is no outstanding balance. Before taking up a new debt (e.g. loan from the bank), it is important to ensure that we have the resources to pay off the debt. It is necessary to allocate a certain manageable percentage of your income for debt reduction or settlement. Never let your debts snowball without having the resources to settle them.
It should be obvious to you by now that there are many aspects to money management. The above are just some part of it. Which part or aspect seems daunting or difficult to you?
In simple words, what is your biggest financial problem?