How to Maximize Your
Hard-Earned Money
by Craig Lock
"Whatever you have, spend less."
- Samuel Johnson.
Every day we make decisions about money that have an effect on our
standard of living. Sometimes they are only small ones. You have to make
financial decisions about how to spend your money. You are in effect the
managing director of your family's
business. Spend more than you get in, your business will soon go broke.
Consequently, you have to ensure that you live within your means and balance
the household books (weekly or monthly depending on pay-day) - otherwise
you will get into financial difficulties.
The more money you are able to save each week or month, the higher will be your
ultimate standard of living, although being a miser will not bring
happiness. You have to strike a balance in your life between saving and
spending. After all, who wants to get to a comfortable retirement after a
lifetime of frugality and no memories? We all know that "penny-pinchers"
and "Scrooges" are often the most unhappy people in the world and that
it's always better to give than to receive. Is it really, or only for
saints?
Your household finances are run just like a business. At the end of each month,
how much of what you earn stays in your own pocket? You will probably
find, like most people, that you are paying everyone else but yourself: the
butcher, baker, candlestick maker and other accounts, like paying off the car
repairs and windows broken by the kids (happened last week - "Oh bother!").
Unfortunately we can't do without money. Also, the older we get, the more we
normally need. You get used to a certain standard of living and comfort, but
as you get older you need far more capital than you thought. We will look at
those various life stages we go through, together with our major financial
responsibilities.
The main areas that affect us over our lives include:
# buying a home
# choosing a mortgage bond
# medical coverage
# children's education
# budgeting
# planning for lifestyle goals (e.g.. a new home, car, holiday,
business)
# replacement of consumer items, like car, furniture, washing
machine
# retirement planning
# investment planning
# estate planning for very wealthy people (because of estate taxes)
# professional services (such as legal, financial)
Of these, retirement planning is probably the most important priority, because
we may have a significant portion of our life
when we don't have any income coming in.
THE TEN MOST COMMON MISTAKES PEOPLE MAKE IN MANAGING THEIR MONEY:
I believe this is the reason why so many people have a needless struggle with
their finances.
1. Poor debt management through excessive borrowing - not being
able to live "within your means"
2. Failure to monitor their financial position
3. Lack of motivation (desire) to take action
4. Lack of foresight in looking ahead
5. Failure to set financial plans for the future
6. Lack of knowledge - financial ignorance can prove expensive
7. Inadequate protection (insurance) against unforeseen events such
as death, disability and physical losses
8. Procrastination in taking remedial action
And most importantly,
9. Lack of discipline in saving habits and
10. Poor investments: you either pay too much tax on them or
inflation eats into your return, or both, so that your money
actually goes backwards. Even worse, you could lose all your money
if the company to whom you gave your money goes broke.
KNOWLEDGE:
From the above we can see that some basic financial knowledge is
vital for all people to survive in the financial "jungle" that is
today's world. Gaining financial knowledge takes time, effort and
discipline. You are the manager of your finances, so make a plan
to reach your financial goals. Then implement it.
ACTION is the key word.
Good PLANNING and good luck.
Craig Lock http://www.craiglockbooks.com