money management for beginners and dummies written by giovanni richters narrated by tim cicerelli introduction do you try to save money for your future but have more debt than you can handle or do you simply want to develop better money management habits do you wonder where you need to start or how to manage your finances if yes then this is the perfect audio book for you the importance of money management should not be overlooked money management is a life skill that gives you a 360 degree overview of your finances it helps paint a picture of your
income and provide you with several simple techniques and strategies that you can use to preserve and increase your wealth for this transformation you need to learn to manage it effectively and efficiently there might be several things you want to do in your life determination discipline hard work patience and persistence are invaluable life skills that bring you a step closer to your goal one ingredient most forget about is the role that money plays money might not buy happiness or automatically fulfill all of your goals but it makes life easier the inability to manage money properly can
increase financial stress and burden the good news is that it is never too early or late to learn about money management there are four simple aspects of money management you need to concentrate on budgeting saving debt repayment and investing you need to keep repeating these four steps to achieve financial independence these steps will help you to reduce your debt financial stress and give you a better sense of what you need to prepare apart from this it also teaches healthy spending and saving habits if you are new to all of this money management for beginners has
all the answers you need so why don't we get started right now chapter one start with a budget if you are new to money management the first thing you need to do is create a budget this is the first piece of personal financial advice anyone would give a budget essentially refers to a skeletal framework to determine the best use for the money you earn after all it is your hard earned income if you don't have a budget in place you wouldn't even realize when you are neck deep in unnecessary expenditure budgeting helps to establish specific
limits for expenditure for responsibility using your money creating a budget helps to develop positive spending habits increase your savings and make sure that the money in your bank goes exactly where it's supposed to as a beginner it can be a little overwhelming to think about all of this creating your first budget might seem complicated but once you go through the different steps and tips discussed in this chapter you will change your mind about budgeting now let's get started with designing your first budget steps to follow step one determine your reasons before you create a budget
it is important to determine your motivations and reasons for doing the same in life it is always important to have a goal because it offers a sense of direction without it the chances of squandering your resources increase drastically when you set a budget your finances or worries will reduce you don't have to live from paycheck to paycheck worrying about every penny you spend before you start the process defining your motivations increases the chances of creating an effective and efficient budget the reasons also have a significant effect on the financial choices and decisions you make during
this process common reasons for establishing a budget include repayment of the debt increasing savings and reducing overspending it also offers an opportunity to reflect on all your goals and personal values and break free of the paycheck to paycheck mentality a budget ensures that you always stay on the right track towards attaining your financial goals determining your motivations for creating a budget plays an important psychological role in how you handle money when you start crunching numbers it increases your emotional investment in the process improves your motivation to stick to the budget and reduces the scope of
overspending step 2 analyze your spending habits if you want to establish a realistic budget you need to pay close attention to your existing spending habits if the budget is not realistic you are merely creating a wish list of all that you desire if you have no idea of where the money goes and the purchases you make the budget cannot be realistic take time and consider your spending habits in the last 30 days you can use a spreadsheet or a notebook to keep track of all the purchases if you haven't done this so far start immediately
give yourself a month before establishing a budget make a detailed note of all your expenses whenever you make a purchase keep the receipt or record it in a journal or spreadsheet online applications can be used to help you figure out your spending habits for instance apps such as pocket guard and mint can be linked to your bank account and credit cards to track your expenses make sure that all the purchases and expenses are labeled accurately for better assessment apart from this use your bank statements and credit card statements to track spending if you are new
to budgeting chances are you have never really paid any attention to your bank or credit card statement now is the time to start doing this it takes a little while but the time spent doing this will help create a better budget step 3 create a detailed list of your income a budget cannot be created without taking into consideration your earning capabilities while making a note of your income be realistic and conservative it means you should always overstate your expenses and understate your earnings this technique helps you create a budget that considers worst-case scenarios such as
your earnings are less than your expenses the various sources of income you need to consider are passive income regular wages or salary business income income from investments and any child support alimony that you receive if your income isn't fixed consider paying yourself a monthly salary this is really important for freelancers and entrepreneurs when you know your monthly earnings you can start budgeting the expenses accordingly if your earnings are more than the salary you've decided set it aside for a bad month the monthly income included in a budget needs to be an average of your earnings
be conservative while determining the sum also don't forget to tweak the budget depending on any changes in earnings step 4 track regular expenses tracking your expenses gives a detailed idea of where your money goes daily your budget needs to reflect intermittent expenses such as holidays birthdays and anniversary expenses an ideal budget needs to consider your annual expenses and not just the daily ones some irregular expenses you need to remember include insurance premiums medical charges vacation and holiday expenses property and personal taxes and special occasions such as anniversaries and birthdays if you don't want to end
up incurring holiday debt consider all these expenses use a calendar and previous credit card and bank statements to determine how much you roughly spend on irregular expenses step five determine your financial goals in the first step you are asked to determine why you want to establish a budget now it is time to consider your personal financial goals money is a limited resource with multiple uses determining your financial goals ensures that you make the most of this precious resource a few common long-term financial objectives include saving for retirement creating an emergency fund repaying major debts setting
up a college fund saving for your child's future investing in property purchasing a vehicle marriage expenses and so on there are no hard and fast rules about financial goals because they vary from one individual to another the budget should always be aligned with your goals with your budget you can determine how much you need to set aside to achieve your goals goal setting increases your motivation to achieve the goals while establishing your financial goals make sure that they are as specific as possible for instance the goal i want to be financially independent is vague even
though it makes sense it doesn't describe the steps you need to take or the deadline for achieving it for instance if your financial goal is to save for a house instead of i want to save for a house tweak it slightly to state i need one hundred eighty thousand dollars to buy my dream home by twenty thirty this goal is specific and time bound if your goals aren't time bound the risk of procrastination increases it becomes difficult to figure out your progress while following a vague goal setting a financial goal is one of the most
important steps of establishing a budget step six figure out how much to save you need to save invest earn more or use a combination of these three methods to meet your goals an efficient budget always considers your savings for every financial goal make a note of the funds required to achieve it once you have these figures on hand allocate a specific saving quota for it for instance if your goal is to save one hundred eighty thousand dollars to buy a house within six years then you need to save twenty five hundred dollars per month for
the next seventy two months you need to save at least one hundred dollars monthly to create a one thousand dollar emergency fund within ten months to repay a five thousand dollar ten percent debt within a year you need to repay four hundred forty dollars per month so on and so forth do you get the drift determining the savings required to achieve major goals such as saving for college or a down payment to buy a house is not easy a quick google search will give you a rough estimate and you can work with those the more
specific your goals are the easier it is to determine their financial requirements once you do this it becomes easier to decide how much you need to save for these goals as a rule of thumb make sure that you save at least twenty percent of your monthly income step seven prepare your budget all the steps given until now relate to the basic homework you need to do to establish a budget now you need to decide the kind of budget you wish to make the two primary options you can consider while making a budget are the zero
based budget and the 50 30 20 budget in the zero-based budget approach you essentially need to make sure that the income you earn minus the outflow of funds amounts to zero the budgeting technique was made popular by dave ramsey with this approach to budgeting you can make sure that every dollar you earn has a specific purpose and isn't wasted some of your income will go into savings and investment while the rest is assigned for various expense categories this is a brilliant approach if you want to limit your overspending and are keen on debt repayment on
the downside it can also feel a little restrictive the 50 30 20 budget approach helps to divide your earnings into different categories for more flexibility according to this 50 percent of your monthly income goes towards basic needs such as debt repayment food rent and other utility bills around 30 percent is allocated for entertainment and leisure activities such as eating out holidays or vacations while the remainder goes toward monthly savings if you are using this budget you will have more financial flexibility but be responsible about how you spend the simplest way to make this budgeting approach
work is by automating all of your savings by doing this twenty percent of your monthly income is automatically saved even though different methods can be saved their aim is the same streamline expenses reduce overspending and increase savings take time and carefully consider your lifestyle regular expenses and earning capacity after you take all of this into account choosing a budget approach becomes easy it is important to find the perfect budgeting method for your needs if it is too restrictive or extremely flexible the chances of overspending and mismanaging of funds increases also the budgeting approach needs to
be sustainable in the long run creating and sticking to a budget is a helpful financial habit step 8 crunch the numbers now that you've decided on the budgeting technique you want to use it is time for number crunching to get started divide all expenses into different categories you need to be as specific as possible right now for instance you can create one category of expenses for entertainment that includes how much you want to spend when you eat out shop or go for a holiday another expense can include general expenses such as grocery and monthly utilities
once you have all the categories set a spending limit for each category these numbers need to be based on your current spending habits for instance after going through your utility bills and other expenses if you realize you are spending eight hundred dollars on food every month write it down if you decide to make cutbacks on this category set a realistic budget if you set a monthly budget for all food-related expenses as 200 it might not be realistic if you set an unrealistic spending limit you're setting yourself up for failure while deciding the spending limit leave
a little wiggle room for all unexpected expenses this is an important part of budgeting there will always be unexpected expenses for instance if you allocate 200 for entertainment and the concerned month includes a special occasion such as a birthday or anniversary this expense is bound to go up ideally for each category of expenses create a wiggle room between fifty to a hundred and fifty dollars when you are crunching numbers be sure that you write them down or put them in an excel sheet you cannot create a budget if you do not write all of this
down make sure the spending expenditure is in sync with the budgeting approach if you're using the 50 30 20 method your monthly earnings need to fulfill all your expenses while leaving a little wiggle room remember the process might sound easy but it takes careful consideration in planning don't forget to be realistic while doing all of this step 9 be accountable creating a budget is the first step toward better money management so don't be under the illusion that your job ends after creating a budget no you need to make sure that you responsibly stick to your
budget if you want to meet the goal of managing your money figure out how you wish to live by the budget to do this you need self-discipline apart from self-discipline here are a few simple tips you can use to make sure that you stick to the budget you worked very hard to create an old-fashioned way to make sure that you follow the budget is by following an envelope system it essentially means you need to take a couple of envelopes and write down the specific category of expenditure they're meant for at the beginning of the month
place the required amount in each of these envelopes for instance if you place 500 in an envelope for grocery and food expenses make sure that you spend only the amount in the envelope once the envelope is empty it means you have exhausted the budget for the specific expense another brilliant way to increase your accountability to the budget is by automating all bills and savings for instance if you decide to save twenty percent of your monthly earnings automate your bank account to automatically debit this amount the same technique can be used for bill payments too when
the money you earn goes toward meeting the basic expenses the chances of spending it on unnecessary expenses reduce an important aspect of budgeting is to track all your expenses whether you have a budget or not start tracking your expenses to understand your spending habits after you set a budget you still need to track the expenses if you want to stick to your spending limits an online application might come in handy these online apps let you decide a budget track all the expenses you make based on pre-established spending limits if you want you can also share
your monthly budget plans with your partner family members friends or even a co-worker this increases your sense of responsibility and accountability a fascinating aspect of our psyche suggests that our accountability increases when we share our plans with others step 10 do a budget review once you have established the budget follow it for a month at the end of the month review all the expenses and see if there is any room for improvement if you realize certain expenses can be further reduced make changes in the budget for the upcoming month to accommodate the reduction on the
other hand if you notice the budget is unrealistic reset adjust the budget according to whatever you have learned from your saving and spending habits in a month additional tips once you have established a budget don't forget to share with others in the household financial stress is a leading cause of tiffs between couples if you aren't living alone consider the household expense too if you and your partner or others in the household aren't on the same page about the expenses or budgeting ideas sticking to it will become difficult when you are all on the same page
it becomes easier to regulate expenses and develop healthy spending and saving habits also it never hurts to have your loved one as a support system by sharing your budgeting goals with others it increases personal accountability there are several online applications and programs you can use to work out the logistics of monthly budgets from using excel spreadsheets to notes the choices are endless depending on your tech comfort use an online tool accordingly an online application will save the same time and effort spent toward creating a budget and tracking earnings savings investments and expenses you need a
budget mint and pocket guard are just a few of the popular budgeting applications you can link your credit cards and bank accounts to these applications after this set a budget limit for different categories of spending these applications will help to track the frequency of expenses online apps also help you meet your financial goals and measure the progress that you make mistakes to avoid budgeting is not a science it is an approach of trial and error it is not a perfect process don't get discouraged if you don't get it right the first time to increase your
chances of success avoid common budgeting mistakes beginners make you don't always have to make mistakes to learn something there's a lot to learn from others mistakes the three common budgeting mistakes you need to avoid are as follows the first mistake is the most obvious one setting unrealistic expectations improper budgeting based on unrealistic expectations is a recipe for failure if your budget is inflexible and based on excessive expense cutting it will become frustrating remember the financial stress you were trying to avoid an unrealistic budget will merely increase it the second mistake is the failure to consider
significant changes they will need to make this is especially true for unexpected repairs and maintenance costs while establishing a budget to increase your savings cutting out discretionary expenses like cable or eating out might help these little cuts are doable but they aren't the only problem for instance moving to a cheaper house to reduce rent using public transportation to cut down on travel expenses or maybe even getting a roommate might help these changes might sound easy but unless you prepare for them they are not possible the failure to consider all of this will make budgeting extremely
frustrating the third mistake is to establish a budget based on your gross earnings even if you have a fixed income the annual salary reduces when taxes and premiums for health insurance is deducted as a rule of thumb always create a budget based on your income after all deductions if you're not sure how much you take home every month look at the receipt for bank deposits and actual cash inflow now that you know how to start budgeting to increase your savings and reduce unnecessary expenses attaining financial goals becomes simpler it also reduces the chances of getting
overwhelmed while reorganizing your finances the sooner you start budgeting the closer you are to achieving your financial goals apart from securing your future you finally get to enjoy a guilt-free conscience while spending chapter two work on your savings perhaps the hardest part of money management is to start saving in the previous chapter you were asked to establish financial goals to achieve your financial goals you need money this sounds obvious doesn't it well there are two ways in which you can increase your wealth the first option is to increase your earnings and the second is to
increase your savings savings are invaluable if your expenses increase with your earnings attaining financial goals becomes a distant possibility to avoid this start saving if you are new to savings then remember it is never too late or early to start saving it is a healthy financial habit and make it a lifelong one emergencies seldom strike with a warning your best shot at efficiently dealing with emergencies depends on your financial health you might think your earnings are fairly good and you have nothing to worry about or maybe you believe you are too young to start worrying
about savings this line of thinking is flawed what if you are handed a pink slip at work what if a medical emergency presents itself sure you can depend on loans for a bailout but how will you repay to avoid getting caught in such situations start saving immediately in this chapter let's look at a couple of simple steps you can follow to start saving keep track of expenses if you want to start saving you need to be aware of all their expenses unless you know how much you spend creating a proper savings plan is not easy
start tracking all your expenses including petty and miscellaneous expenses regardless of how minor an expense is make a note the goal of doing this is to gather as much data as you can to understand your spending habits and monthly expenses once you have all the expenses in place divide them into different categories such as utility bills credit card payments and so on make sure that the record of expenses you maintain is accurate if you struggle to do this you can always use an online application or go old-school way and keep a diary create a savings
budget after you've created a detailed list of all of your monthly expenses organize them into a workable budget follow the different steps discussed in the previous chapter to create a monthly budget all the expenses need to be less than your earnings if you are overspending create a list of expenses that can be reduced while creating a monthly budget take into consideration the savings aspect too yes your monthly budget needs to allocate for how much you wish to save ideally try to save anywhere between fifteen and twenty percent of your monthly income make budget cuts if
you notice that your expenses are too high or that you cannot save as much as you want time to start scaling back go through your list of expenses and look for areas where budget cuts can be made to do this prioritize the expenses for instance the monthly utilities and grocery bills should take precedence over non-essential expenses such as cable tv or maybe the money spent on entertainment and leisure activities is too high if so start limiting your budget if there are any subscriptions you seldom use but are paying for unsubscribe go through all of your
automated monthly payments and eliminate any unnecessary ones if you eat out frequently try cooking meals at home it is usually a small sum that amounts to significant expenses for instance spending five dollars for one cup of coffee might not seem like much but if you spend five dollars daily it amounts to one hundred fifty dollars per month well if that doesn't sound like much it adds up to one thousand eight hundred dollars annually for coffee what if you start making coffee at home imagine all the money you can save start looking for cheaper alternatives and
creative ways to reduce unnecessary spending to avoid overspending or unnecessary purchases here is a simple technique you can use whether it's the cute pair of boots that are tempting you or anything else give yourself a cool down period of 10 days after 10 days do you still want those shoes this technique helps to understand the difference between needs and wants during the initial days of the saving period try to concentrate on needs and not wants establish a savings goal the best way to get anything done in life is to establish goals goals offer you a
sense of purpose increase accountability help measure your progress and help make sure you are on the right track another advantage of goal setting is it helps to make the most of resources available at your disposal in the previous chapter you are asked to establish financial goals similarly you need to establish savings goals for yourself for instance if your monthly earnings are five thousand dollars set a monthly goal of saving at least one thousand dollars and saving twelve thousand dollars can be your annual goal set short-term and long-term savings goals a short-term goal is something you
wish to accomplish within one to three years and anything beyond this period is a long-term goal examples of short-term goals include creating an emergency fund a long vacation and gathering funds for non-payment for a vehicle examples of long-term goals include saving for retirement a child's education or even a down payment for a house while establishing these goals make sure they are small measurable attainable relevant and time-bound the goals shouldn't be vague and need to fulfill all these conditions an example of a short-term savings goal is i want to save x by x for a holiday
to x you can further divide this goal into smaller monthly savings goals whenever you achieve a particular month's goal it automatically increases your motivation to keep going learn to prioritize once you are aware of your income and exponential the next step is the allocation of funds while doing this start prioritizing prioritizing is an important life skill in your personal and professional life the resources at your disposal are limited so you should consider the best way to utilize them while prioritizing consider the opportunity cost for each of the different options available the task is quite simple
you merely need to decide which of your goals are the most important and urgent ones every short-term and long-term goal you set should be prioritized according to their significance and need for instance if a short-term goal is more important and urgent than a long-term one prioritize for now once you have a list of priorities start working on them while doing this there is another simple tip you need to remember just because you have prioritized one goal doesn't mean you forget about all the other goals for instance if creating an emergency fund is your priority it
doesn't mean you forget about saving for retirement you need to work on all your goals simultaneously but the allocation of funds for the most important and urgent goal will be higher than the others select your tools how do you plan to save do you want to create a specific bank account invest in a short term option or do you have any other idea in mind the most suitable savings tools you can use for short-term savings includes a certificate of deposit and savings account for a long-term goal you can consider investing in the securities market individual
retirement accounts that offer tax efficient benefits or increase your contribution to the government approved 401k remember you don't have to just opt for one of these options you can use a combination of options to increase your savings you will need to consider some basic factors when making these decisions such as minimum balances required any interest rates or fee tax deductions available and the lock-in period automate your savings the technological revolution has influenced the banking and financial sectors too these days most financial institutions offer automation of deposits and payments you can automate the transfer between savings
and checking accounts to make sure a specific portion of your monthly earnings directly goes to the savings account you don't have to worry about depositing money every month because automation helps save time and effort you merely need to issue a standing instruction relating to the savings account for instance if you wish to save 20 percent of your monthly earnings standing instruction should state the same if you receive your salary at the end of the month create a standing instruction such as your savings account will be debited in the first week of the subsequent month if
you followed all these tips it means your savings are slowly growing you have taken the first step towards creating a secure future now don't forget to review your savings goals if your expenses increase or your earnings increase the savings budget will need to be redefined regular monthly reviews of the budget and the progress you make help identify any problems and fix them immediately chapter three a debt-free life whether your credit card bills are piling up or your student loan needs to be repaid dealing with debts can be troubling it is a leading cause of financial
stress learning to manage it is an important part of financial management regardless of whether you have little or massive debt piling up getting out of it is essential also even small debts can soon spiral out of control when left unchecked similarly if you have a massive debt that needs to be repaid the effort towards repaying that needs to be redoubled while dealing with debt it is important to understand that repaying it is only one part of stabilizing your money matters even though you need to prioritize debt repayment it shouldn't derail your savings and monthly budget
the monthly budget needs to make specific locations for monthly debt repayment working toward a debt-free life is important at any given point in life your debt shouldn't be overwhelming if you are neck deep in debt try to get out of it as soon as possible here are a few simple steps you can use to work toward a debt-free life make a list of your debts the first step of debt repayment is to determine your total debts the first step isn't always easy or pleasant but it is the most important one it is time to acknowledge
all your debts remember the scene from the confessions of a shopaholic where rebecca bloomwood is forced to confront her debts well it is time to do the same if you are feeling overwhelmed you can ask a friend loved one or a family member to help you get started a little moral support at this stage helps take time out of your busy schedule and make a list of all your debts include the type of debts you need to pay whether they are monthly installments or credit card bills make a note of it while listing the debts
make a note of the total debt owed monthly payments due date and the payable interest rate once you can see the overview of debts your job starts don't forget about this list after making it you need to update it especially once you start repaying the bills regularly make payments on time every payment you miss increases the interest payable to avoid falling into a debt trap make sure that you make timely monthly payments the interest rates and late fees payable increase whenever you miss payments so you not only have to repay the interest and the principal
amounts but the additional charges increase your debt let's assume that you need to repay five hundred dollars every month and the late fee is fifty dollars if you miss your payments for three months the debt increases by one hundred fifty dollars avoid increasing your debt by making timely payments set monthly alerts about the due dates or mark them in your calendar this reduces the chances of missing the due dates if you miss a payment don't wait until the next billing date to make the payment you can automate the repayment of specific bills especially the ones
with fixed amounts for instance the payment emi on a significant loan and fixed monthly utility bills can be automatically debted from the savings account if your monthly earnings are deposited in your account on the same day every month this method helps alternatively mark your calendar with due dates of different bills and their payable account after this fill in the date on your paycheck if your payments are credited to your account on the same day every month your calendar will show the upcoming payments tweak the calendar according to the date you receive the paycheck this method
gives you an overview of all the debts owed and their respective due dates always make the minimum payments after crunching all the numbers if you realize that anything more than the minimum payment is not affordable at least do that minimum payments are not synonymous with significant progress when it comes to debt repayment on the plus side they keep your account in good standing it means you are avoiding late fees by making minimum monthly payments catching up becomes doubtably harder when you miss any payments if you're not careful this can quickly spell out a control in
your account can go into default prioritize debt repayment in money management you need to be good at prioritizing it's not just about prioritizing expenses and savings but you should prioritize debt repayment too in the first step you are asked to list all your existing debts now it's time to prioritize which of these debts is the most important one for repayment each debt will have a different interest rate and due date start repaying the ones that have the highest interest rate if your credit card debt has the highest interest rate start repaying it quickly you might
not realize it but the interest amount adds up to a significant sum in the end instead of unnecessarily increasing your debt try to clear high interest debts first alternatively you can also start by repaying the debts with the lowest amount for instance if you have five debts and three of them are small amounts consider an immediate repayment at least you will be free from three debts and you can concentrate on the other two regardless of the technique you use start repaying immediately be mindful of collections and charge-offs if your funds are limited concentrate on the
account where you have good standing after all you can only repay based on how much that you can afford if there are any positive accounts do not let them go because your credit is already affected whenever you can afford it always clear any outstanding dues use a monthly budget in the first chapter you are asked to establish a monthly budget this monthly budget ensures that your earnings do not fall short of your expenses the simplest way to reduce debt is by reducing your expenses if you keep increasing your expenses debt will also increase instead of
creating a highly stressful financial situation learn to manage your expenditures if it means economizing get to it when it comes to that repayment it's always about long-term gains forget about short-term pleasures and instant rewards for a while instead concentrate on creating a debt free life recognize when you need help if you are struggling to pay your debt and the bills are piling up it's time you seek help look for a financial advisor and create a plan of action to deal with your debts many debt relief options include debt settlement debt consolidation and bankruptcy bankruptcy should
be your last resort apart from all these steps discussed in this chapter you need to create an emergency fund even setting a small emergency fund of a thousand dollars can be quite helpful if you can't access your savings you will need to rely on the money in case of an emergency to avoid this start creating an emergency fund you don't have to have some massive amounts every month saving as little as a hundred dollars can be quite helpful chapter four invest for a secure future if you want to become good at money management you need
to learn about investing investing is a great way to increase your wealth or preserve it when it comes to investing a common mistake beginners make is they jump into the game without understanding the financial risks involved if you are not careful you might end up losing everything you have before you start getting scared of investments learn about them knowledge is power when it comes to investing spend time and learn about what you wish to do with your funds before you start investing after all there is no point in taking unnecessary financial risks at this stage
before you consider any investment options you need to start saving for retirement or a rainy day another rule you need to remember is to always repay your debts before investing once you are debt free or your debt burden is relatively manageable think of investing if not you will merely be increasing your debt burden and financial stress two other rules you should remember before investing is to stay on top of your monthly expenses and create an emergency fund once these four things are in order consider investing if your finances are in order it is time to
concentrate on increasing your wealth in this chapter let's look at a couple of simple tips all investors should be aware of before investing always know your motivations as with anything else in life you need to be aware of your reasons or motivations if the idea of investing is not fueled by internal motivation or a goal chances of success reduce your reasons for investing also determine the investments you make try to see your big financial picture to decide the reasons if your goal is i want to get rich quick chances of making mistakes increase learn how
to invest the importance of learning should never be underrated in this world of the internet we all have quick access to information take a few minutes out of your daily schedule to read more about investments learn about the different types of investments their pros and cons minimum capital requirements and the risks involved before you jump into the game of investing make sure you understand all the rules properly rules about investments as a rule of thumb always avoid investments you don't understand if you don't understand how the stock market works stay away from it even if
you hire a professional for help you need to know how your funds are managed and the returns you earn this is in direct correlation with the point mentioned before it is easy to get caught up especially when the dollar signs are appealing before you invest read as much about it as possible you can also talk to your family members friends and co-workers for suggestions calculate your risk tolerance success requires taking risks that said be wise about the risks you take to do this calculate your risk tolerance risk tolerance is quite personal and there are no
specific figures involved here it means you should never invest more than you can afford to lose if you only have two hundred dollars for investing then stick to this limit the chances of losing the money invested are quite real if you end up investing one thousand dollars and ultimately lose it you've not only made a poor investment choice but you've lost your hard earned money too avoid investment fads the problem with fads is despite their initial appeal they don't last if you're investing in cryptocurrencies is the latest fad jump on this bandwagon only after thoroughly
researching the pros and cons just because everyone you know is doing it doesn't mean you should too forget about the herd mentality and instead do what is right for you take the first step if you want to start investing you need to take the first step and get started stop waiting for the perfect time to invest prepare yourself mentally that investments are all about risk remember to take into consideration all the different tips mentioned until now before you start investing set investment goals whenever you are investing make sure that you have investment goals by determining
the reasons for investing it becomes easier to create a portfolio of investments make a list of your short-term medium-term and long-term goals a time frame within each you want to achieve them and the dollar figure associated with each of the goals for instance a simple short-term goal you might have here is an exotic vacation within the next 12 months a medium goal could be to gather the funds required for a house down payment when you have tangible and measurable goals it becomes easier to keep up your motivational level while investing it also helps you to
track the progress you make always start with broad-based investments there are several types of investments to choose from these days with each passing year the number of financial instruments available is merely increasing now that you know you want to invest the next question is what you want to invest in instead of getting overwhelmed by looking at all the options available opt for broad-based investments such as exchange-traded funds and mutual funds these securities usually include a pool of money obtained from several investors for investing in securities this is a simple way to get started if you
don't want to invest in the stock market look for secure investments such as treasury bonds and certificates of deposits keep your costs low previously you were asked to consider your risk tolerance while considering the risk tolerance it is important to keep the costs involved quite low as a newbie always pay attention to the costs after all the common goal of any investment is to increase your wealth and not reduce it consider the fees payable to brokers commissions and taxes payable and the lock-in period before receiving a return on investment for instance if you invest all
your savings in a fixed deposit with a five-year lock-in period these funds are inaccessible for five years if you think this is a decision you can live with go for it if not look for other options in addition to the previous tips there is another one you need to remember and it is asking for help as soon as you need it it is okay if you don't understand everything about investments in investing seeking help when required is a sign of growth and development whether you reach out to your friends and family members or seek professional
help get it when you need it control your emotions when it comes to investments never let your emotions get in the way if an investment looks attractive right now invest in it because it is good for your portfolio or it offers good returns do not invest because everyone is going gaga over it whether it is a decision about entering or exiting a market or starting and closing an investment always use solid logic and rational thinking instead of emotions chapter five common mistakes we all work hard to earn money an average workday lasts for around eight
hours after all this hard work the money we earn seems to disappear at an extraordinary pace even if you save regularly does it seem like your financial goals are impossible to achieve an emergency comes along or an unexpected expense which quickly drains all your earnings if all this sounds familiar to you chances are you are making money management mistakes by avoiding the common mistakes discussed in this chapter you can increase the efficiency of all your money management steps discussed until now don't live paycheck to paycheck if you are used to living from one paycheck to
another it's time to change this regardless of the zero budget approach or the 50 30 20 budgeting technique create a budget and stick to it if your monthly payments are credited on the first of every month and you quickly blow through it by the 10th it is a sign of a serious budgeting problem make sure your monthly income covers your lifestyle expenses savings and debt repayment if any always have an emergency fund in place if you don't have one yet create it now the emergency fund should be equivalent to the amount you will need to
live comfortably for the next six to eight months keep adding money into this fund regularly ignorance is never bliss ignorance is never bliss when it comes to money matters financial security needs to be created you need to think about the future instead of hoping for the money troubles to disappear create a plan of action and stick to it don't overspend never spend more than you need to if you are frequently dining out buying things you don't need or cannot account for where your hard-earned money goes it's time to change that stay on top of your
expenses be mindful of every penny you spend and avoid falling into unnecessary debt every small unnecessary expenditure incurred in the present can lead to massive debt in the future living a debt fueled life don't live a life fueled by debt borrowing is easy but repayment isn't try to get rid of existing debt before incurring a new one ideally don't opt for loans and any other debts as much as possible even if you use a credit card for a purchase make sure that you have sufficient funds in the account to cover the cost lack of motivation
the most common money management mistakes a lot of beginners make is they lack the motivation to get their finances in order you need to realize money management is good for your financial health self-discipline personal accountability and a sense of responsibility are necessary to avoid the money management mistakes discussed in this chapter conclusion money management is a crucial life skill the inability to manage your finances can be a source of great stress since we already lead hectic lives reducing financial stress can work wonders whether you are saving for a rainy day an exotic vacation or trying
to gain financial independence there are four simple steps you need to take first you must budget then increase your savings then quickly repay debts and finally start investing these steps will stabilize your financial life and increase your wealth in this book you were introduced to simple steps you can start following today to achieve these goals now all that's left to do is to start implementing the simple suggestions and tips discussed in this book careful planning patience and consistency are the three things you need to concentrate on to manage and improve your financial health the good
news is you have complete control over how you manage money so what are you waiting for there is no time like the present to get started copyright 2021 all rights reserved the contents of this book may not be reproduced duplicated or transmitted without direct written permission from the author under no circumstances will any legal responsibility or blame be held against the publisher for any reparation damages or monetary loss due to the information herein either directly or indirectly legal notice this audio book is copyright protected this is only for personal use you cannot amend distribute sell
use quote or paraphrase any part of the content within this audio book without the consent of the author disclaimer notice please note the information contained within this document is for educational and entertainment purposes only every attempt has been made to provide accurate up-to-date and reliable complete information no warranties of any kind are expressed or implied readers or listeners acknowledge that the author is not engaging in the rendering of legal financial medical or professional advice the content of this book has been derived from various sources please consult a licensed professional before attempting any techniques outlined in
this book by reading or listening to this document the reader or listener agrees that under no circumstances is the author responsible for any losses direct or indirect which are incurred as a result of the use of the information contained within this document including but not limited to errors omissions or inaccuracies this has been money management for beginners and dummies written by giovanni richters narrated by tim cicerelli copyright 2021 by giovanni richters production copyright by giovanni richters
