How people manage money usually reflect how they manage the other areas of their lives; their work, career, and business.
Money is a tool, and if well managed can serve the owner well. There are generally a few ways of managing money.
- Some get their month’s salary and spend it on what they need and want and leave the balance in the bank as savings.
- Some makes use of their credit card first to pay for the month’s necessities. When they get their salary, they pay off the credit card bill, spend the rest, and save the balance (if any).
- Some set aside an amount of money in a special account that they keep for savings or investments for the future and spend the rest of the money.
The first two options can help a person save for the future, but there is a lack of discipline in saving for the future. So, when faced with a decision on spending, you need to ask the following questions:
- do I need this? can I live without it?
- can I get this later or must I have this now?
- do I want this to impress my friends and family? If the answer is ‘yes’, refer to the previous question.
- last question to ask: do I have the money for this now?
The second option’s danger is overspending on credit and not having sufficient funds to pay the whole credit card bill when the bill is due. Amounts unpaid when the credit card bill is due is subject to finance charges or APR of around 13% – 18% depending on your bank. The average overdraft rate is only 7% – 8% p.a. currently. The whole credit card bill needs to be paid off in order not to have any debt pile up. Spend wisely using credit cards and paying off the bill in full is prudent management of your finances.
The last option is where discipline is involved. This discipline involves planning and budgeting the monthly and yearly expenses required and saving the rest. If the money is insufficient for the expenses planned, then the expenses plan is reviewed and reduced so that there is sufficient money to spend and save for the month. This discipline needs to be cultivated when young, or there will be trouble in the future.
If you like to learn more about managing money wisely, check out our programmes for working adults (two days – Saturday) & teenagers (one day)
