In this tough economic situation, it is mandatory to be a good money manager. I'll be discussing few thoughts on how to manage money.
1) Make it a point to settle your debts at first - On the first day of every month, pay your rent, auto insurance,health insurance,home insurance, credit card bills, fuel bills (electricity charges, water charges, house tax), grocery bills, fitness center bill
2) Make it a habit to save 6% of your earning towards long term investments. This includes list of options including pension plans, Life insurance, bonds, social security benefits(increase the contribution towards your 401K (for US citizens - vary on a country by country basis). This is mandate because it is the core which helps us lead our retirement life in peace
3) Have a portion of cash set aside for your food expenses, fuel expenses (gas station)
4) If you are planning to purchase utilities, check with www.irs.gov to see if they are eligible for tax deduction. This year Solar heaters can be claimed towards tax deduction benefit (Will vary. Check with IRS for frequent updates)
5) Have 14% of your monthly income saved in short term investments including Fixed deposits, certificates. So, now 20% of your income goes towards savings
6) PENNY SAVED IS PENNY EARNED - If you are planning to purchase a new gadget like laptop, ipod etc - write down its cost in a piece of paper. Divide it by 10. Say you are going for a new laptop worth $1000. So, $100 is the amount set aside per month. This is the amount that you need to cut down from your spending. Have a box set aside for this. Whenever you get tempted to spend on outings, have a look at this box. Have a look at it for 2 minutes. Now put the amount set aside towards your spending in this box. Follow this until you reach that monthly limit say $100 in our case. Thus penny saved is penny earned. This will eventually be helpful in times of need.
Life always goes smooth if we follow this 80-20 rule. So, Save 20% of your monthly income from first month. Spend the remaining 80%
