“Spend your money wisely” is one of the most common financial advices and I am sure somebody must have told you. Irrespective of how many times you have been advised to spend your money wisely, a lot of people still spend unwisely.
I won’t be bluffing if I say that some people do not know precisely what it means to spend money wisely. It’s a bit complex; a wise spending for Mr A could be a foolish spending for Mr B.
The reality is that everybody appears to be familiar with these financial nuggets; only the determined put these nuggets into practice. And that is where the problem lies.
As a fact, the earlier you start developing the habit of implementing specific financial hacks the better. In other words, most people fail to build the right financial habits early and find it harder to change those habits over time.
I wouldn’t want to bore you with lots of ways on how to start spending money wisely, just follow these three steps outlined below.
Spend less than you earn
This is more like a cliché, you have heard this lot of times, but you haven’t done anything about it. As far as wealth creation is concerned this is one of the steps that must be taken. If you are the type that keeps spending seems obvious, but you’ll be shocked at how few people master this habit.
If you’ve already got this down, push yourself to spend only 70% of what you earn and put 30% of your money to work for you. The trick is, the more you earn, the lower you should spend as a percentage of your salary.
Plan for the worst-case scenario
Money is just like a visitor, it comes, and it goes especially if you do not thrive to keep it. Most people are always thrown carried away when things are getting all fine because money is available. It is very imperative to plan for the worst scenario.
Assuming you lose your job or your primary income stream, what would be your next line of action? There should a support system when these things happen.
I will advise to create an emergency fund and channelled a few months of expenses to it. You don’t need to fall back to your emergency fund when you are not financially buoyant. Practically, this means emergency, whatever that would make you fall back to it should be an emergency issue.
Avoid credit cards.
Credit cards have pushed people into accumulating debt. Nobody should lure you into signing up for a credit card; I will only recommend it if you know you can foot the bill