Having money doesn’t make you rich. But knowing how to properly utilize your money is something that smart people do. It doesn’t matter how much you are paid. People with low salary who know how to save and utilize their money are better than people with high salary who end up wasting most of their money on useless things. There are several ways by which you can boost your wealth status and increase your finance.
Let’s have a look at the 12 Basic Money Skills Everyone Should Know
1. You can’t get rich by just saving money
No one in this whole world has become rich by just saving their money in banks. What makes you rich is what you are doing with that money – saved cash or liquidity for emergencies and for bearing your living expenses. It is good to have some liquidity to sustain your living. However, saving all the money for this purpose is definitely not a wise decision.
2. Wealth, liabilities, saving
Being wealthy doesn’t mean owning high-end assets. It depends upon your financial assets and other such things. You must think that your 10 crores worth of car can also be converted into money. You are wrong here, it is a liability, not an asset. You spend a lot of money on things like paying interest, maintenance of the car, driver’s salary, etc. So, it is important to have assets that are going to help you gain more money in the future. Learn the actual difference between what’s making your wealth and what’s depleting your wealth.
3. Use taxes smartly
People usually get scared of the taxes but smart people make the taxes work for them. To master your finances, you need to pay along with it. Every country has a different tax law and makes sure that you are taking proper benefit out of it. There are several exemptions and deductions that you can avail of, you just have to be knowledgeable and smart about it.
4. Learn to use other people’s money
This is a general mistake amongst poor or middle-class people that they use only their money. They fear loans. Sure, taking a loan for something extravagant is a stupid idea. But taking a loan to increase your earnings at a low-interest rate is a good decision to make.
5. Earn more, not spend less
As we mentioned earlier that you can’t become rich by saving money. Similarly, you can’t increase your wealth by spending less. Shift your idea from spending less to earning more. There are thousands of ways to earn more and more money. You just need to find something that would work for you.
6. Know your needs
Now that you have figured out that you need to bring in more money, it’s time to figure out how much money you actually need. Once you learn how to grow your money wisely, you will not end up wasting your money. Make a list of the places where you spend most of your money. Once you know it, it will be easier for you to cut down your unnecessary expenses.
7. Have a retirement plan
The most common mistake that people do is that they completely ignore their retirement plans. Once you start earning good money, the first thing to do is to ensure that you have a proper retirement life. There are also a lot of tax benefits from the government for putting your money into retirement funds. It’s never a good idea to become a burden on someone. Look for your retirement plan and make it as efficient as it could be.
8. Safeguard your money
Safeguarding your money is very important as you cannot afford to lose it. Investing all your money in one place is a very risky thing to do. If anything goes wrong, you will end up losing all your money. The best way to safeguard your money is by diversifying it. Invest it into different places where you are getting good returns for a long period of time and any kind of uncertainty doesn’t affect you.
9. Passive money
You must have heard of the concept of ‘making money while doing nothing.’ Well, this is real and you can actually do that. Your money can help you make more money if you invest it strategically.
10. Know the 50%, 30%, 20% rule
The very important aspect to manage your money is by dividing it into parts like needs, wants, and investments. We all have certain needs and wants and this is where 50% and 30% of your money should go simultaneously. The last 20% of the money should be compulsorily used for investing. This rule is very important and people must follow it.
11. Don’t make money your meaning
Stop your habit of taking the value of every penny. You are here to build a fortune not to stay at zero levels. This can only be done by levelling up your work. If your work is good for your boss or your client then they will be willing to pay you more without having a long negotiation.
12. Buy life insurance
This is one of the most ignored things. People do not take it seriously and are not ready to accept the fact that your life is the most uncertain thing in the world. Buying life insurance might not work in your favour but is definitely going to help your family. It will ensure their future and it is undoubtedly one of the best use of your money.