Learning to manage money properly is never too late. Whether you’re a student, an employee, or a retiree, managing your money or your finances properly is something so fundamental that it’s always a good idea to stay on top of it. In practice, many people spend their money on things that, in retrospect, they didn’t need after all, or that they could have gotten much cheaper with a little research. At the same time, a large proportion of People continue to refrain from investing their money, resulting in a further decline in assets due to inflation.
Therefore, managing money correctly is basically a matter of two sides of the same coin. On the one hand are conscious consumption, keeping track of one’s spending; or in summary: Saving money. And on the other hand, investing surplus money to generate interest and dividends.
Table of Contents
1) Create a Budget
The first step to learning to manage money better is to create a budget. Write down all your monthly income and expenses and find out where your money goes. This way you can see where you can save money and where you might be spending too much.
Start by writing down all of your monthly income. This includes your salary, possible side income like freelancing or rent payments, and anything else you take in on a regular basis. Take the time to cover everything thoroughly and make sure you don’t forget anything.
Next come the expenses. Divide them into two main categories: fixed expenses and variable expenses. Fixed expenses are those that remain the same each month, such as rent or mortgage, insurance, subscriptions, or debt repayments. Variable expenses, on the other hand, can vary from month to month, such as food, transportation, entertainment, or clothing.
Once you’ve written down your income and expenses, it’s time to analyze them. Start with your expenses and see which categories take the biggest chunk of your money. You may find that you’re spending too much on restaurant meals or that your supermarket purchases are higher than expected. These are the areas where you can potentially save money.
Once you’ve analyzed your expenses, look at your income and see if there are ways to increase it. Can you work overtime or look for additional sources of income?
It may sound tedious at first, but keeping a budget book can be very easy if you use the right budget apps.
In my opinion, the best budget app is Money Manager. This is completely free and makes your life much easier. Here you can find a detailed guide to the app.
2) Set Savings Goals
Learning to manage money properly requires structure and clear guidelines as well as goals. In addition to keeping a budget book, it is a good idea to set goals for your savings. Whether you want to provide for a vacation, a car or the future, savings goals give you an incentive to put money aside and not spend it impulsively.
Once you have identified your goals, it’s important to make them specific and measurable. Instead of just saying, “I want to save money someday,” you should set a specific goal with a defined time horizon, such as, “I want to save 1,000 dollars within the next six months.” This will give you clear direction and incentive to reach your goal. It can also be helpful to break your savings goals into smaller milestones. This makes them more realistic and achievable.
3) Set Priorities
Prioritizing is an essential part of learning to manage money. It’s about figuring out what’s really important to you and how to align your financial resources accordingly. For example, do you want to travel, buy a property, continue your education, or invest in your personal development? By being clear about your priorities, you can better align your financial decisions and avoid unnecessary waste.
Of course, that doesn’t mean you have to give up everything you enjoy. It’s more about making conscious choices about how you spend your money. Maybe you can save in certain areas to spend more in others. Find a healthy balance that allows you to pursue your priorities while finding joy and fulfillment in your life.
4) Automate Savings
Je manueller etwas ist, das heißt, je mehr du aktiv dafür tun musst, desto größer ist die Wahrscheinlichkeit, dass man es irgendwann wieder sein lässt. Therefore, automatic savings is a great way to make sure you’re setting aside money on a regular basis. By automating the savings process, you eliminate the need to consciously set aside money each time and create a habit of saving regularly.
Set up a standing order that automatically transfers a set amount from your paycheck to a separate savings or overnight deposit account*. This way you save without much effort.
5) Compare Prices
Another tip for learning to manage money properly is to compare prices in different stores or online before making a major purchase. You’ll be surprised how much money you can save when you look for the best deals. But also pay attention to quality and do not let yourself be guided only by the price.
And of course, you have to factor in your time as well. I myself don’t think much of running from store to store to save $1 somewhere after all. That would be too much of a waste of my time. Therefore, save primarily on your large and medium expense positions. These include the purchase of electrical appliances (keyword: Black Friday), insurance, electricity, telephone providers and other subscriptions. Experience shows that you can save up to $1,000 a year just by switching to a cheaper electricity and gas provider. In addition, there is great potential for savings on vacations. How to save a lot of money when booking a vacation without giving up anything, you can read in this article.
6) Reduce Debts
If you have debt, you should reduce it as soon as possible. Start with the debts that have the highest interest rates and work your way up from there. Come up with a plan to get rid of debt in the long run and avoid more debt in the future. By learning to manage money properly and following the other tips here, you can avoid getting into debt in the first place.
7) Build up Emergency Fund
It is important to have an emergency fund to cover unforeseen expenses and avoid debt. Set aside a small amount each month until you have enough money to cover several months of your expenses. That way, you’re financially protected in case something goes wrong.
At the same time, an emergency fund also provides psychological relief. Knowing that you have financial reserves to fall back on in times of need gives you a sense of security and allows you to go through life more calmly.
8) Learn to Invest
As mentioned at the beginning, learning to manage money means not only that you have your finances under control and save money, but also that you invest your money if possible. Because you’ll see, financial goals are much easier to achieve when you make your money work for you and receive investment income.
Learn about different investment options, such as stocks, ETF, bonds, or real estate, and how to invest your money profitably.
If you want to completely avoid stocks or ETF (which I wouldn’t recommend), I would at least strongly recommend parking excess money in instant and fixed deposit accounts to earn interest. Since many branch banks continue to pay no interest at all, I would transfer some of the money to the Weltsparen platform. There is a wide range of different overnight and fixed-term deposit accounts there.
At Weltsparen, you already receive over 3.5% interest per year on overnight deposits. On fixed-term deposits with a term of 1 year already over 4%. And all of this is risk-free with european deposit protection up to €100,000. I myself have a daily and fixed deposit account with Weltsparen and have been satisfied so far. Here I have reported on my experience with Weltsparen. Or just sign up there for free and try it out!*
9) Avoid Impulse Buying
Learning to manage money also means making rational purchases and, for the most part, avoiding impulse purchases. Of course you should reward yourself from time to time, but only in a way that doesn’t break your budget. Therefore, before you make a major purchase, think carefully about whether you really need it and whether it fits into your budget or whether the cheaper model would also be sufficient. If you have a wish, wait a few days to see if it’s still important to you. Often it will turn out to be just a passing fancy.
10) Education is the Key
In today’s fast-paced and complex financial world, education is the key to successful money management. The more you learn about finance, investing, money management and other financial aspects, the better you will be able to make informed decisions, save money, invest smartly and use it to shape your financial future. There are many ebooks, books, apps, online resources, and courses to help you do this.
The best Savings Apps
I have presented the best (mostly also free) savings and finance apps in detail in this post. Here’s a quick list of the most important money-saving apps:
The best Finance Books to learn how to manage money
These tips for learning how to handle money properly will already bring you a lot if you apply them. However, if you want to find out in more detail about learning to manage money, finances, making money online, online business, etc., I can recommend several free financial books. You can find them here. And as I said, the books are free, there are only shipping costs, but in my opinion still a great deal.
Conclusion: Learning to Manage Money
Proper money management requires discipline, patience and education. With these 10 tips on learning to manage money the right way, you’ll be well on your way to achieving your financial goals and building a solid financial future. Remember that it is a process and it takes time to change habits. Keep at it and you will reap the rewards of your efforts.
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