Basic Rules to be Money Wise
From Financial Literacy Wiki
Below are the basic rules to be Money Wise
Contents |
Live within your means and monitor how you spend
It is very important that we live within our means. This is very challenging (but does not mean it cannot be done) given that banks are aggressively selling their credit cards with credit limit above our monthly income. So take on credit cards that you need for its discounts offered in stores and restaurants that you frequent.
It is vital that you monitor your expenditure so that you are not spending more than you should, and you will notice some areas where you can cut down your expenditure further, increase savings and use compound interest to work for you.
Save a portion of your income before spending the balance
If you have read many financial planning books, this is the "Pay Yourself First" mantra. What you should do is to keep two accounts. The first account should be your salary-crediting account and the other, your savings accounts. Every month, without fail and immediately on your pay day, shift a sum of the money to your savings accounts and only touch the savings account for investment purpose.
Aim to keep at savings that are at least six to twelve months of your monthly expenditure
Given the volatility of our economy and uncertainty in life, it is vital that you prepare an emergency fund. This emergency funds should only be touched as a last resort and it should tie you through a period of six to twelve months while you make adjustment to the new situation. Remember to adjust this funds according to your expenditure situations. A good place to place your emergency funds would be money market funds where risk are lower and interest rate is higher than your savings account.
Use Credit Wisely
We are bombarded by a wide variety of credit cards. You need to choose those credit cards that offers discount on stores and restaurant that you frequent often and REJECT those credit cards that does not. With lesser credit cards, it helps in managing them since it is vital you remember your total expenditure and when the payment due date is for each card.
Another important point is, always settle your credit card debts promptly to minimize charges. You will be surprise by the number of charges you are slapped with if you never pay promptly.
Buying Financial Products
Most of us shop around to get the most value-for-money consumer products. We should apply this mentality to purchasing financial products as well since we are investing with our hard-earned money. Use the Internet to gather information. Discuss with your spouse or your parents. Feel free to call up the banks for more information. Read up the terms and conditions of each financial products. Only when you fully understand how the financial product works then you should put it inside your list of options. DO NOT buy financial products that you do not understand.
This is especially true with insurance policies. An endowment plan from one company can be substantially different from one offered by another company. Find out how the insurance policies works, what it covers and what it excludes. Find out also how the claim process is like.
To be continued...
