How to get better with cash management.




How to get better with cash management.

How to get better with cash management. Financial security means having enough money to cover your expenses and achieve your goals, while also having peace of mind that your income will meet your expenses. Financial planning is the road that leads to financial security. So, how do you work on financial security if you’re not there already? Here are 10 things to consider.

1. Invest before you spend

Your consumption each month should be equal to your income (after all taxes) minus your monthly investments. Regular investment every month grows your wealth, so your money is making money for you. As with any investment, have a diversified portfolio, with a mix of growth investments in equities and alternatives, and income investments in fixed-income solutions or structured products.

2. Have an income stream

Being good with money means having a regular stream of income, either from your job or from your investments. Additionally, knowing how much you take home every month allows you to plan how much you’ll invest and how much you can consume.

3. Have a budget

Once you know how much you earn and deduct what you invest, what is left is for your consumption. Budget for this amount. Planning and tracking your expenditure for regular and unplanned costs is key to sustaining your lifestyle, and knowing how much you have each month to grow your wealth.

4. Treat yourself

Don’t accumulate money for the sake of accumulation. It’s important that you not be mean to yourself and you take that holiday without incurring any debt. Try to tie the treats to achieving a goal or a milestone so that you’re not travelling just because it’s the holiday season.

5. Resist peer pressure

Even as you treat yourself, resist the pressure to buy things you can’t afford or don’t need just because your peers are doing it. Financial security requires you to have the emotional maturity to live within your means.

6. Consistently pay down your debt

Debt is not bad, especially if applied to investments, such as an education or buying a house – that is good debt. Bad debts are those that don’t help you build assets, or those that are not part of your goals, such as credit card spending on luxury items, or incurring debt for consumption. Avoid bad debts, and pay back what you owe consistently. This way, you’ll have more money to invest and treat yourself.

7. Set up an emergency fund

By their definition, emergencies come up when you least expect them, such as health problems or the loss of household property. Financial planning requires that you have a fund stowed away for the surprises that life throws at you, with at least three to six months of expenses in short-term investments to avoid having to borrow expensively at the last minute. Also, get appropriate insurance, such as for sickness and death.

8. Plan for retirement

A key financial goal is planning towards retirement, no matter what age you are. Start by considering the lifestyle you want when you retire, how much it will cost per month (even an estimate), add something on top for any unexpected events, and work backwards towards investing every month to reach your goal.

9. Conduct periodic financial health checks

Financial planning is the journey towards financial security. And every journey needs periodic checks and assessments. Goals change as life progresses, and so does your situation in terms of income, health and family. Keep reviewing your financial plan to monitor your progress towards achieving your goals for a house, education, wedding or retirement. You may realise you need to invest more, or have more money set aside than is needed.

10. Continuous financial education, learning and research

All financial decisions should be based on research. Financial education allows you to set realistic goals for yourself, with timelines that are achievable. Learning about financial planning makes you a more proactive investor, and research allows you to analyse multiple options to ensure you make the right financial decision.

Written by distribution manager, Cytonn Investments.

How to get better with cash management



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