Building Money Management Skills
Most of us often aim and work for raising “big money”, but very few of us know how to manage finances to build this “big money”. Also, once this big money is acquired, how should you handle it? Okay, so what can you do transform your earnings and savings into wealth?
1 START ASKING THE RIGHT QUESTIONS
Assess your knowledge about capital markets – both private and public. Find out how much do you actually understand about returns. Once you start thinking on these lines, you create a proper roadmap to drive your finances smoothly. Do not rely only on “friend’s recommendations” – build your own knowledge.
2 TO DIVERSIFY… OR NOT
While investing, understand the perks and risks involved in diversifying your investments. While most trade “experts” highly recommends diversifying investments, some trade analysts advise against it. These trade analysts suggest keeping all eggs in one basket and watching that basket carefully, rather than keeping a constant watch on ten different investments. So, make your choices very carefully when it comes to diversifying.
3 MORE THAN ONE INCOME SOURCE
Doesn’t matter how big your one income is, depending on just one source can prove to be extremely risky in the long run. What if the industry you work in goes through crises? Running around for other sources at that point of time would be tedious and troublesome. So, the better option is to start working on multiple resources for the flow of income.
Check business blogs and magazines to find out what others are doing to create multiple income sources. Talk to people who understand finance better and gain good exposure to various trades and industries. Your primary income should not be your only income source.
4 BEWARE OF “HAPPENING” TRENDS
Avoid making your decisions based on new and latest business trends. What’s hot in the market or which business is creating the most buzz of late – never fall for these pitfalls. This way, you can reduce risk factors for your investments. Focusing on new technologies and developments is good, but jumping into a roller coaster ride, is not. Avoid it.
Most of the times, new technologies rise and fall at quite a speedy pace. What’s hot today might not be so hot in a week or month from now. Instead, invest in technologies that have made firm roots in the market. Check with professional analysts before you put your money into a technology of which you have limited knowledge.
5 SAVINGS… ARE NOT ALWAYS THE BEST OPTION
Banks provide a very low-interest rate for the savings kept with them. It’s as good as leaving your money idle. Not a smart thing to do. Your money has to work and make more money for you. Savings need to be turned into investments. Risks are involved in any investment, but so are the rewards. By not taking any risk with your money, you are limiting your chances of increasing it.
Savings accounts are probably not the best place to keep your money. Your money should be working for you, not gathering dust.
There is a big difference between earning money and creating wealth. People often confuse between the two and face problems ahead in life. Do not commit this grave mistake. The error could cost you a lot.