saving money
saving money is the starting point of financial management. As we said before, income is a river, wealth is a reservoir, and the money spent is the water that flows out. The initial wealth in your "reservoir" must be obtained through accumulation.
so, how can we save more money?
first, compulsory savings. For example, after receiving your salary every month, you will deposit 1% of your salary in the bank.
second, planned consumption. To form a good habit of keeping accounts, check regularly to see where your money has been spent and whether it is reasonable.
third, try to pay in cash. The feeling of paying cash is different from that of swiping a card. Paying cash means spending with feelings, while swiping a card means spending without feelings, which will cost you more money.
fourthly, if you use a credit card, you must tie it with your savings card. In this way, you will not forget to repay the loan and avoid the high penalty interest of the bank. Credit cards are usurious, with a daily penalty of .5% and compound interest on a monthly basis (many banks are now adjusting the terms of credit card management). Never swipe your card in order to get a small gift from the bank. It's really childish.
fifth, delay consumption. Don't buy the latest consumer goods, any kind of consumer goods has the highest price when it is just introduced. If you can delay your consumption desire and buy it later, you will certainly get a lot of benefits, and the rest of the money can be saved.
sixth, don't take out a loan to buy a car. Buying a car with a loan is a sign of a person's deteriorating financial situation. If you must buy a car and don't have that much money, you might as well buy a cheap car or a used car, because a car is nothing more than a means of transportation. If you are really rich, a good car can show your identity, then you certainly don't need a loan.
Seventh, if you buy your own house, you can get a loan. However, the monthly repayment amount should not exceed 3% of your monthly income, so you won't have too much repayment pressure. In case the bank interest rate rises, you still have room for manoeuvre. If the monthly repayment amount reaches 5% of your monthly income, you will become a house slave and you will feel very uncomfortable.
please remember that saving money is the starting point of financial management, and those who can't save money will have no money to manage. Financial management begins with saving money.
making money
Qian Shengqian is the focus of financial management. If you save all your money in the bank, you will face a problem: in the long run, the interest rate of bank deposits can't run away from inflation, which means your money will depreciate. If you invest all your savings in risky investments, you may outperform inflation, but you may also lose money. So, how should we allocate and use the money in our hands?
I suggest dividing the money in your reservoir into three parts and putting them in three pools. The first pool contains emergency money, the second pool contains life-saving money, and the third pool contains spare money.
I divide it in this way according to the three attributes of investment. The three attributes of investment are liquidity, security and profitability. Emergency money corresponds to liquidity, life-saving money corresponds to safety, and idle money corresponds to profitability.
Let's take a look at what these three kinds of money are used for:
Emergency money. Emergency money is used to deal with unexpected expenses such as unemployment and family illness. The average family should keep one year's living expenses as emergency money. Emergency money can be used to invest in short-term savings of banks, short-term national debt, money market funds, short-term capital preservation type bank wealth management products, short-term capital preservation type brokerage wealth management products, etc. These investments have low returns, but good liquidity, can be realized at any time, and will not lose money.
life-saving money. Life-support money includes one's own pension and children's education expenses. The average family should keep at least 3-5 years' living expenses as life-support money, and with the growth of age, the life-support money should be saved more and more. By the time you retire, you should have 2 years' living expenses (considering inflation). Life-saving money is mainly used for investment banks' regular savings, medium and long-term treasury bonds, bond funds, social insurance, savings-oriented commercial endowment insurance, corporate bonds, capital-guaranteed bank wealth management products, capital-guaranteed brokerage wealth management products, etc. These investments have a fixed income, a moderate rate of return, and are very safe.
spare money. Idle money is idle funds that families have not used for more than five years. If they are retired people, they are idle funds for more than 2 years. This money can be used for venture investment, but it is not necessary to make venture investment. The money can be used to invest in stocks, equity funds, real estate, gold, foreign exchange, investment-linked insurance, non-guaranteed bank wealth management products, non-guaranteed brokerage wealth management products, private equity funds, QDII products, collectibles and so on. These investments may bring higher returns, but they may also produce losses. We use spare money to invest, just like drilling a deep well beside the "reservoir", in order to make the water in our "reservoir" continuously replenished.
protecting money
protecting money is the guarantee of financial management. It is not enough for us to rely solely on saving money and generating money, because it is possible that your family's "reservoir" will burst due to an accident (illness, work injury, car accident, accident liability), and your family's money will be greatly lost or even completely lost. Therefore, we need to build a dam outside the reservoir. The so-called dam construction means buying insurance. These insurance products include: term life insurance, accident insurance, critical illness insurance, medical insurance and so on. When you encounter an accident, insurance will provide you with compensatory funds to help you tide over the financial crisis.
to sum up, the method of financial management can be summarized as "one center and three basic points": taking money management as the center, saving money as the starting point, focusing on generating money and protecting money as the guarantee. It is extended to the eight-character policy of financial management, that is, managing money, saving money, generating money and protecting money. A visual explanation of the eight-character policy of financial management has formed the nine-character motto of financial management: build reservoirs, dig deep wells and build dams. Article from: Life Finance Network