How To Properly Handle Your Money

This is all about the most essential, most powerful, and most mishandled tool you will ever have in your life. It can be an ally or an enemy, helpful or destructive, a source of happiness or misery. The role it will play in your life will depend on how you see it, treat it, and use it.

Although it may seem as such, the problems we encounter with money have little to do with how much of it we have. We can have less than what we need and still be able to make do. We can have exactly what we need and use it on the wrong things. We can have more than what we need and let that wealth drive us to ostentatiousness.

The most common dilemma we face is deciding when we should spend it, and when we should save it. Though the most practical answer would seem to be to spend on necessities and scrimp on luxuries, some would argue that spending on whims is also important as a way of rewarding ourselves, and thus serve as a motivation to work harder and earn more.

Much has also been said about the 50-30-20 rule, which suggests that fifty percent of your income is allocated to living expenses, thirty percent to recreation, and twenty percent to savings. But this division assumes that you’re earning enough for such allotments. What if your living expenses make up 85 percent of your income?

There may be no hard and fast rules when it comes to handling money, but there are some general guidelines you are well-advised to follow:

Save up whenever you can.

It may be hard when you’re just starting your career, but as you grow older and your salary gets bigger, earmarking a portion of your pay will become easier. Of course, the bigger the portion, the better.

Minimize your debts.

Don’t fall under the spell of your credit card. Use it wisely and pay the total amount due every month. Otherwise, it will incur interest, which means you’re going to shell out money without getting anything in return. Debts can ruin lives. Unless it’s for a medical emergency, don’t make any purchases you can’t pay for at the end of the month. You’re just going to be throwing money away. Don’t scoff at small amounts. They add up real fast.

Minimize your loans.

There are some instances when paying interest is unavoidable, like when you’re getting a housing loan or buying a car with installment terms. This somehow makes sense because it’s the only way you can buy a house or a car, given their steep costs. Just think of the added interest as the price for the privilege of paying in installment. But don’t take on too many loans, or you may end up getting just a tiny fraction of your take home pay.

Make sensible purchases.

When you buy something, it pays for its worth whenever you use it. So that tool you bought for a hundred dollars and use every day is a sensible purchase, whereas that tool you bought for fifty dollars and used only twice is not.

Don’t buy anything only because it’s on sale. Unless you plan to sell it and earn from a markup.

Don’t make impulse purchases. In this day and age, when product reviews and client feedback are overflowing on the internet, it’s almost a crime to buy something without first consulting what critics, influencers, or fellow consumers are saying about it.

When you get duped into buying a dud item these days, despite having a vast amount of information at your fingertips, it’s no longer the fault of the seller. It’s yours.

Invest in yourself.

If it’s something that will make you better at what you do, or make you learn new skills useful in your career, or give you opportunities to broaden your network, then go spend on it. Chances are, it will pay off in the long run.

Invest in memories.

This phrase is often stated in relation to travel, but you don’t have to fly to a foreign country to invest in memories. You can take your loved ones to that expensive resort they’ve been dreaming to go to, and seeing their happy faces will be a special memory you will cherish your whole life.

Be cautious in lending.

Everybody knows money can ruin friendships, but that doesn’t mean you shouldn’t at all help a friend who’s in financial need. Squabbles that stem from financial disagreements are often caused by misunderstanding and inconsideration, so communicate keenly on when you need your money back, and try to keep an open mind when they tell you the reason why they can’t pay you on time.

When a friend approaches you for a loan, only you can decide if it’s something that can potentially ruin your friendship. Factors you should consider are urgency of need (how serious an emergency it is), your friend’s personality (if they have a reputation for dodging people they owe), the state of your funds (if you can afford to lend money), and the amount requested (the bigger the amount, the more chances of fighting), to name a few.

Be disciplined in borrowing.

You obviously have to be efficient in allocating your financial resources, which is key to living within your means, so you don’t have to borrow for your daily living expenses.

But life is full of surprises and sometimes we find ourselves suddenly needing a large amount of money that we don’t have. Either because something bad (sickness, accident) or good (a job offer abroad, found a house with bargain price) had happened.

If you really must borrow money from a friend, be strict with yourself on the payment terms you’ve agreed upon, no matter how kind or understanding your creditor is. Your integrity is on the line. If you say you’ll pay on a particular day, do everything you can to keep your word. It’s the least you can do to thank your friend for helping you out.

Don’t gamble.

Gamblers often say what they do only becomes bad when done excessively. Problem is, excessively can be a moving target.

When you gamble, you throw money away because you’re not getting anything in return. Sure, there’s always a chance you’ll win. But what do you do with the money you won? You’ll gamble it away again, of course.

Some say money used for gambling is like money used to buy thrills. But wouldn’t it be more practical if we use that money to buy something more practical and of more value than mere thrills?

Gambling is a slippery slope once you get addicted, and we’re not just talking about the ones in the casinos. You also gamble when you put wagers on your favorite sports teams or play the stock market. Some argue that it takes skill to dabble in stocks, but the bottom line is that when you’re not in control of the outcome and can only make educated guesses, it’s gambling.

Don’t be a slave to money.

Money is important, but it shouldn’t take precedence over your loved ones or your well-being. Work hard but not at the expense of your health. Work overtime but not at the expense of family time. When we die, we won’t take any of our money or material possessions with us to the afterlife, anyway.

Time, energy, and money are the three personal resources we manage in our daily lives. Time and energy are given to us every day for free when we wake up.

But money, we must work for, ask for, beg for, or steal. It’s the hardest to get and the easiest to lose.

Read more about how to properly handle your finances in Life Basic Strategy Guide 
Available on AmazonSmashwords, Apple Books and other leading eBookstores.

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