4 Things You Need To Know About Money| How To Better Manage Your Finances

Money is a tool we use to live. The quality of life you get usually depends on how much money you make. We’ve all heard this before:  “Money does not buy happiness”. What do any of us need to be happy? The answer to this question can be different for everyone. However, we are united on one thing: everyone needs a minimum of money to be able to live a somewhat decent life.

As you all know, we need money to live – period. The lack of money or not enough money puts you in a situation where you can’t have access to the most basic things. Almost everything costs money. And things like food, shelter, clothes, which are the most basic things a human being needs to survive, can only be acquired with money. So, if money doesn’t buy us happiness it helps us get closer to it.

It’s very dangerous to be in a situation where you can’t afford the basic things to survive. This creates a sense of urgency and necessity and makes us inclined to do whatever it takes to survive. This is what brings some people to steal shoplift Etc in order to achieve their goal. Therefore, it’s very important for all of us to make money and keep as much as we possibly and Legally can so we can live a decent life.

While we usually do know how to make money, a lot of us don’t know how to manage it the right way. Which is where personal finance comes in. Personal finance is a way for you to be able to manage your money the best way possible in order to position yourself for a good financial situation.

So, here are four basic things you need to know about money management

1. Spend less then you earn

You might have heard this before but it just makes sense. If you want to be in a good financial situation, your first step is to spend less than you earn. Way before credit cards existed people used to only buy things they had money for. I know it can be very tempting to get credit cards  and spend money you have not earned yet. However, you need to know that when you’re doing this, your future earnings are not yours until you have paid off all the debt you owe. So, stop spending more than you are earning and stop taking credit to buy things you can’t afford. Instead if you want to buy something, figure out if you have the money for it. If not, find a way to get the money before you make the purchase. This will make you more aware of your finances and will ensure that you are not spending money you don’t have.

2. Make a budget

In order to figure out your Financial Health, you need to know how much you are earning and how much you are spending. To achieve this goal, you need to create a budget. If you don’t know what a budget is, it basically shows you all of your finances at once. Budgeting helps you keep track of your money so you know where you are spending every dollar you earn. This allows you to find ways to eliminate unnecessary expenses and save more of your money for more important things. You would be surprised where you spend most of your hard-earned money. Which is why it’s important to do your budget every month to track your expenses and make sure you are spending your money efficiently.

If you’d like to learn more about how to create a budget that works for you, I already created a video on budgeting and I will leave the link in the description box below.

3. Avoid bad debt

Living with bad debt can really slow you down in your financial journey.  Bad debt is basically debt that negatively impacts your finances. Essentially, it’s debt that you take to make unnecessary purchases or to buy things that add to your expenses and do not put money back in your pocket. Remember that any credit you take needs to be paid back with your future earnings. So, any future money that you earn in the next few months or years is not all yours if you have debt. If you’d like to get ahead financially, you need to make sure you’re not burdened with any bad debt. While paying off debt is not easy, mastering this can help to positively impact your finances and achieve Financial Freedom. If you’d like to learn how to pay off debt as quickly as possible, check out the link in the description box below for the video I made to explain this in detail.

4. Save, save and save

According to a government of Canada statistic, about 64% of Canadians have an emergency fund sufficient to cover 3 months of expenses. On top of this, about 65% of Canadians think they can come up with $2,000 of emergency fund within the next month if need be. So, as you can see a lot of Canadians are already on the right track and it’s time you do the same.

If you’d like to be financially stable, it’s important to save for emergencies and for retirement. You never know when your next emergency will be. Your car can break down at any time, or you can have plumbing issues in your house for example and you need to be ready for when this happens. And believe me, it will happen. They don’t call it emergencies for nothing. They just come by surprise and if you did not prepare, this is where you would have to take on debt in order to resolve the situation temporarily. And since it’s best  to avoid debt at all costs, it’s important to make sure you have enough money in an easily accessible savings account to cover any unexpected expenses. Ideally, it’s recommended to have between 3 and 6 months worth of your monthly expenses to cover emergencies.

Saving for retirement is also crucial. The best way to make sure you live decently during your retirement years is to save during your working years. So, don’t forget to put a certain percentage of your salary in a Registered Retirement Savings Plan (RRSP). An RRSP is an account specifically designed in order to help Canadians save for retirement. I also have a video explaining how the RRSP account, I will live the link in the description box below.

The bottom line

Money management is no easy task. However it is something that can be learned in order to help you reach the financial goal you desire. So, make sure you educate yourself as often as possible and apply what you learn so you can get your finances in order and master personal finance.