Beginners Guide to Managing Your Money

Did you know that two different people with the same income can have different financial statuses? One of them constantly has to borrow money, while the other always has enough money to pay. Why does it happen? Perhaps because one of them can rationally manage their funds, and the other does not know how to do this.

Beginners Guide to Managing Your Money

How to determine if a person knows how to use money correctly? Here is our list of 10 signs that someone has learned financial literacy. Check how many of these signs you can count.

1) You Always Have Enough Money Before Your Paycheck

This is a clear sign that a person doesn’t know how to manage his finances rationally if he regularly feels short of money 2-3 days before the paycheck. Some people find it necessary to restrict themselves to “somehow make it to pay.”

Additionally, these people can calculate how much money they spend every month to buy food and other essentials. Decide upon a total that will satisfy your needs, divide it by 30 and spend it gradually. Despite being boring, this is effective.

2) You Don’t Borrow Money From People You Know

The previous rule is closely related to this one. People who lack the funds to pay their salaries often borrow money from relatives, friends, colleagues, neighbours, or other people they trust. Those who repeatedly ask for loans do not know how to manage their finances. You are okay with your financial literacy if you forgot the last time you requested a loan.

3. You Record Your Spending After Every Purchase

To avoid forgetting all expenses, the individual records them (on a piece of paper, in a spreadsheet, or with a mobile app). His notes help him keep track of his expenses for the month and plan his budget for the following month.

4. You Pay Utility Bills, Taxes, And Fines On Time

People with systematic financial problems first purchase essentials (food, clothes, medicines, etc.). It is then impossible to pay for utilities with any money left over. It may take some time for the debtor to realize that they’re being collected because the process won’t begin immediately but some time afterwards.

An individual who does not owe any utility bills, taxes, or fines is assured of having enough money to cover all of his expenses.

5.  You Have Savings

What good would it do to borrow money if you are financially literate? You must have formed your financial reserve. The size of the “airbag” covers, as a rule, from 3 to 6 average monthly expenses of a family.

From this reserve, you can take money to buy household appliances to replace old ones if they suddenly fail. Or pay for suddenly required medical procedures. If you lose your job, you have something to rely on until you find a new job. If there is no such “safety cushion,” then you have to ask for a loan. 

6.  You Save Some Money On Every Paycheck

If you deposit an amount of money into your savings from every paycheck, then you will have a reasonable sum of money in your reserve to fall back on.

A person should form a habit of spending at least 10% of each salary on savings. This should be done first of all after receiving compensation, and not at the end of the month (after all, by this time, there may no longer be money left).

If you can live on 100% of his salary, then you can live on 90.

7. You Avoid Unnecessary Spending

A person who knows how to manage their money avoids spontaneous purchases. They buy things based on the ratio of functionality, quality, and price of the product. Such a person ignores the “status” of the purchase. For example, They do not buy the latest model of the most productive smartphone at the price of 3 of their salaries, fashionable items from well-known brands, a fully equipped executive class car (if they cannot afford these purchases).

The size of their bank account will tell more about a person’s success than the presence of a fashionable, prestigious phone.

8.  You Make A Shopping List

To avoid spontaneous spending, a financially literate person is used to making a list of necessary things before going to the store. If you don’t have such a list with you, then the expenses in the store can increase by 1.5-2 times. Going for milk and bread, a person will buy himself something else “tasty.” Excessive spending of money will lead to a shortage of funds at the end of the month.

9. You Know The Prices

A person who knows how to manage money will not buy a thing without assessing its value. The prices for the goods that they buy every day are kept in mind by the person. They will not be confused by a beautiful price tag with a 30 percent discount if he knows: in a nearby store, such a product is cheaper without value.

Before making a large purchase, such a person will first spend time researching the offers of different sellers. Or They will use the functionality of aggregator sites on the Internet, where different stores display their goods (for example, Yandex. Market). They can quickly in a nearby store that sorts in a nearby store that all products by price.

In Conclusion

So there we have it. How many of those points do you meet? Now you can self evaluate yourself and know if you are a wise money spender who knows how to manage money or if you are the opposite. 

Keep reading our articles to get more insight on finance-related matters. 

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