5 Tips to Manage Money and Build Wealth
People who make a lot of money are sometimes so bad at managing it that they ultimately have little to no wealth. Conversely, one can acquire wealth without making a lot of money. The key to building wealth is often just about how you manage your money. Follow these five tips to achieve your own financial success:
1. Check your emotions around money
By itself, money does nothing. It's really a tool you use to trade the value of your time and labor for the value assigned to others' services, goods, and experience. When you take the emotion out of how you manage your money, you'll find yourself making much smarter financial decisions.
2. Track your spending
You may find that you don't always want to know what you're spending your money on. However, you need to know where your money is going to achieve long-term wealth goals. Fortunately, you can easily track it-however simple or sophisticated your needs-by using an opp or program such as Mint, You Need a Budget (YNAB), or Ouicken.
3. Set a budget
At a bare minimum, you should plan for PEAR:
Payments to yourself - This money-ideally, a minimum of 10% of your income-is your retirement savings, which will build your long-term wealth.
Extra spend - This expense-ideally, at least 10% of your income-is in addition to your regular month-to-month spending, such as new tires for your car, a new refrigerator, or a down payment on a car. Without proper planning for these kinds of items, you may need to burdensomely put them on your credit card.
Altruistic spend - This spending is for generously helping others, such as charities and loved ones. Plan for this amount to be what you'll want to give.
Regular spend - This amount-ideally, about a maximum of 70% of your income-is for your monthly necessities such as housing, food, transportation, and bills.
By following these PEAR rules, you'll be able to enjoy the fruits of your labor! (Can't resist a dad joke.)
4. Establish your goals
Organizing your finances to create wealth is so much easier when you keep specific goals in mind. What are you saving for-a house, a car, a vacation, debt payoff? Figure out what's valuable to you and create a plan to save the money you need to get it. You can use the same apps that help track your spending to track your savings.
5. Ask for help
If you need help managing your money, you can find help in any number of places-from a certified financial planner, in personal finance books or internet articles, or with tools from your local credit union.
Managing money to build wealth isn't complicated-it just takes effort, intention, and discipline. The sooner you start, the more wealth you can build over time.