How to manage money better and invest wisely?
Today, there’s a world of consumer goods that can be delivered almost instantly to our doorsteps and we’re constantly bombarded with products and lifestyles we want from marketers.
In an age where it’s easy to get credit, good personal financial management has never been more important.
Today we’re going to look at some effective ways to manage your personal finances so you can start building up your nest egg.
What does financial management mean?
The goal of financial management is minimizing your spending and maximizing your income. How much you limit yourself depends on our goals.
For example, if you need to save cash in the immediate future, it may mean compromising on what you want in the short term.
Never forget that little things add up. Take coffee, for example. The average price of a drink at Starbucks is $2.75. That doesn’t sound like a lot of money, but if you buy a coffee there every working day, this quickly becomes over $700 a year. If you just make coffee at home, you can have your morning jolt for only $78 per year.
If you’re looking at saving in the bigger picture, taking stock of what comes in and goes out of your account each month is a great start. It will help you discover areas to cut back on for better savings down the line.
Debt in all forms is best paid off as quickly and efficiently as possible. The longer they go on, the more money you’ll have to pay in extra interest and fees.
If you’re struggling to make necessary payments on loans, you might want to consolidate your debt with a personal loan. By consolidating, you restructure your debt to a single entity and pay them over a longer period. This can give you some much-needed breathing room. Many companies start at 5.95% to 6.99% fixed APR if your credit score is reasonable (660+).
Often debt is unavoidable. The key is to make sure it’s ‘manageable’ and never ‘crippling’.
Get a personal budgeting app
A great tip for managing your money is to get a personal budgeting app. These apps can fully integrate with your bank accounts and credit cards, categorizing and breaking down all of your expenses into coherent lists. They can help you put your finances into perspective.
One of the most popular free apps for managing personal finance and avoiding financial problems is Mint. But if you don’t like ads you can try something like You Need A Budget (YNAB) instead. This app comes with a free 34-day trial, zero adverts, and access to additional features like live workshops on financial and budgeting topics.
Managing your finances is about more than just saving. It’s about putting the money you’ve already have to work. You should make investments that yield returns above the current rate of inflation, or approximately 2% per year. This rules out traditional options like savings accounts and Certificate of Deposit (CD) accounts, as they’re currently below that figure.
If you’re looking to invest in the long term you’ll want to explore pension plans and retirement schemes like the 401(k). If you want to be able to get to your money before you’re 60 or so (without incurring penalties), then you might want to consider investing in an index fund. Today you can even look into peer-to-peer lending investment returns where you can net 7% APR.
Investing isn’t a get-rich-quick scheme. Anything promising higher interest rates will often come with a greater degree of risk. Think of your investments as tools for solid and stable growth, and focus on long-term earnings.
Taking control of your personal financial management is an important part of building wealth. Whether you start with a personal budget app, cutting needless expenses, or investing, you’re actively helping yourself create a future free from debt and uncertainty.
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