Most Important Rules of Money Management

We have often seen people around us who were born rich but die like a beggar. We also see people who have gone through very tough financial times but later have live a financially stable life. It is not that we do not get a chance to earn money or make money but it is our money management skill that makes us or destroys us. This skill is very important in our personal credit or business credit requirements as well.



The habits of people put them in financial crisis. They do not mange their money and income well which lands them in to debt. The biggest mistake that one does is that he/she tends to spend more than he/she earns.



Besides this the second mistake is that people spend money on assets or goods that do not have any return. A certain amount of income should be spend in such a way that it gives you some return.

You need to segregate your expenses. Your income should be divided in te following parts:



1. Household expenses

2. Utilities

3. EMI’s

4. Investments

5. Ready Cash



• The first part of your income should be for your household expenses . grocery, goods, etc. need to covered in this first part.



• The second part should cover the bills, fees, etc.



• The third part of the income should cover the installments you need to make to clear your loans.



• The fourth part should be investments like – trading, fixed deposits, mutual funds, etc.



• The fifth part is equally important which is ‘ready cash’. You should have some cash handy so that in emergency you do need to run around here and there to get some money.



After segregating the salary you also need to see that is there an area where you can save money. The ready cash that you have can be used for any additional expenditure. Whatever you save from the first two parts can be used in the fourth or fifth part.



Budgeting is very essential. Dividing your salary this way will help you keep a check on your income and expenses. Also, making a note of your expenses on daily basis will help you learn where you need to cut down on expenses and where you need to control .



Investments and savings is very essential. Spending whatever you earn is incorrect and puts you in financial crisis at a later stage.



Using the money management skills, you can improve your financial state and would not let you face any problem in your personal credit and business credit .