Have you noticed that many people struggle when it comes to managing money? It’s a common struggle that many people have a hard time with, as many people find it challenging to manage their money, or they don’t know how. Even in school, we weren’t taught by our teachers how to manage money, which is why I want to teach you this skill now.
You see, my followers frequently ask me for advice on how to manage money wisely. Even though they are adults who graduated from school years ago, they are only now learning how to make money, manage money, and keep money. So, I started talking about managing money on my social media. Interestingly enough, some of my viewers tell me, they don’t have any money to manage at all. They think my tips aren’t for them because they aren’t ready to start yet.
If you struggle financially, it’s not your fault. It’s just that you need more knowledge. You probably never learned how to manage your money wisely, or how to keep your finances in order. Still, I want you to be very careful about how you talk about your financial situation.
Think about this: would you say “I start to exercise as soon as I’m fit?” Probably not. That doesn’t make any sense. You don’t wait until you are fit and then exercise. You exercise to become fit.
It’s the same with your money. If you have any money right now, then you have something to manage. Don’t wait to make more money before you learn how to manage money.
Start Managing Your Money Right Now
The fact that you don’t have much money to manage currently, tells me that you don’t know how to manage it well. If you’re poor, you probably don’t know much about managing money. Waiting will only make your situation get worse and worse. Learn while you earn, and learn to manage your money while you’re earning money. Don’t make the common mistake of waiting until you have a lot of money to start learning money management skills. This way, as you are making money you are also managing it.
Imagine you are suddenly earning $6,000 per month and you can’t manage it. Would you be able to manage $10,000 or 20,000 per month? Probably not. That’s why you want to learn to manage smaller sums of money first.
Wealth comes to people who know how to multiply their money. That’s why the rich get richer. Success and wealth have less to do with magic opportunities, and more to do with your knowledge and skills. The rich often have the skills to multiply money and invest appropriately.
If you are struggling with managing money right now, you simply never learned this skill. So, below are 8 tips on how to manage your money wisely and stop struggling financially.
1. The Right Mindset Helps for Managing Money
When you are managing money, with what kind of mindset do you approach your financial situation? Does it stress you out? Does managing money bore you? Do you generally feel negative about managing your money? This is the wrong mindset.
If you think too much about your lack of money, I call that “thinking in scarcity”. You believe that your resources are limited and that you never have enough. A wiser mindset to adopt is the mindset of abundance. If you live in abundance you know there will be enough for everyone.
Let me give you a perfect example. If Bill Gates earns millions of dollars per month, does that mean you earn a million dollars less? No, it doesn’t. Your income isn’t related to other people’s income. The more they make isn’t the less you make. Don’t mistakenly believe there are limits to how much money you can make.
What you need is the right mindset, and the skills to make and keep more money. The amount of money you can make is limitless once you learn how to make, keep, and multiply your money.
2. Managing Money is a Habit
When you want to learn to manage your money, developing the habit of financial order is crucial. What does that mean? Even if you only make $1,000 a month you still want to get into a regular habit of managing it well.
Especially when you aren’t making much money yet, it’s twice as important that you build the habit. If your income grows and you didn’t learn to manage money, you will get yourself in deeper trouble.
If have seen so many people get into credit card debt or other forms of debt because they never learned to manage their money wisely. They made mistakes and have to play catch up with credit card debt and other payments every month. When bigger sums accumulate, it gets harder and harder to get out of it.
If you make $1,000 a month and make a mistake, you maybe lose a bit of money. But you can make it back. If you earn $10,000 and make a mistake, however, you can get yourself in serious debt. That’s why you want to start building the habit of money management as early as you can.
This doesn’t only apply to making money. The same goes for spending money, saving money or investing money. Managing money is a habit that you have to approach with the right mindset.
3. Knowing How to Spend Money
Most people think they only use for money is to spend it. They think their money’s ‘job’ is to get spent. When in reality, money has four jobs: spending, saving, investing and donating.
So spending your money is only one part of your money management. Most people make the mistake of spending too much. They spend more money than they have and get into serious debt.
Then they try to learn from their mistakes and develop money managing systems. But here lies the next pitfall. Most people manage their money poorly because they make their money management system too complicated. As it’s too complicated, they never use it. That’s why I want to suggest a very easy strategy for managing money.
Manage Money With Ease
For every dollar that comes in, 60% goes towards paying your living expenses. With that money, you pay your rent, electricity bill, and all other necessities.
10% goes into your savings for emergencies. This is your safety net in case something unforeseen happens. It could be for medical bills or other emergencies. Usually, you don’t want to touch this money at all. I recommend setting up an extra account for this, so you stay disciplined and don’t touch it.
10% go into investments. Another 10% goes towards your learning. You spend this money on coaching, seminars, books and so on. What about the remaining 10%? They go towards your fun!
If you implement this and stick to it, you will never spend more money than you have. To ensure that, you want your money management system to work automatically. If you have to sit down and do it manually, it won’t get done. I can almost guarantee you that. So, talk to your banker about it. Maybe they will look at you weirdly and wonder why you need five different accounts. But that’s doesn’t matter in the bigger scheme of things. You want to build your habits.
Spending Money is Expensive
There is another reason why spending all your money isn’t a wise decision. Think about it this way: Every dollar you spend is a dollar that is gone.
If you would invest that dollar, however, it would give you returns for the next 20-30 years. So, if you spend $200 on a nice meal – that’s a very expensive meal in a sense, because that $200 could have given you huge returns if you used them for investments. Spending money is expensive.
Now, I’m the last guy to tell you you shouldn’t enjoy your life. That’s why I’m suggesting to use some of your income as fun money. As your income increases, your fun money increases too.
4. Put Some Money Aside For Fun
When you put 10% of your money aside to spend on fun, then there is no guilt about spending that money.
You can’t get rich looking poor. What’s more, you can’t get rich feeling poor. That’s why I recommend spending at least a bit of your money on things that will make you feel good.
So many financial advisers would talk about saving every last penny. They tell you you shouldn’t get that Starbucks coffee. That you should collect all the spare change around your house. How you should sit on your money so you are prepared for emergencies. I don’t agree with them at all. If you limit yourself too much and save every last bit you will fall back into a mindset of scarcity.
It’s ok to like nice things. I know that I like nice things. As long as you keep it within 10% of your income there is no guilt.
Still, it’s very important to keep it to 10% and not to overspend. If you spend too much money on fun your other investments and safeties will shrink.
If 10% fun money is too much for you right now that’s ok. But do at least 1-2%. Because again, spending your money on fun is also a habit. If you don’t build the habit early you won’t manage it well once you have more money.
5. How to Save Money
I recommend saving 10% of your money as your emergency fund. That money goes into a separate account and you don’t touch it unless it’s a real emergency. Don’t spend it on fun. Don’t spend it on your rent. It’s for emergencies only. In the best case, the money on your savings account accumulates without you needing it often.
Watching your money grow is great for your mindset. What I noticed from managing money for myself is this: when you have some cash already you will attract more cash. It’s a psychological phenomenon. Seeing that you have money on your account gives you the feeling that you can make more. You did it before, why not do that again?
So, when you have the habit to accumulate money, you accumulate even more. As I said, it’s not that important how much money you make or save. It’s about building the habit.
Saving money is a thing many many people struggle with. Statistics tell us that 29% of all American households have less than $1,000 in savings.. That means if there is only one emergency, they are wiped out. They are one paycheck away from poverty. Yet, America is one of the wealthiest countries in the world.
Why do so many people lack savings? I believe it’s a lack of habit and self-control. The money you save is meant for emergencies. So many people, they would use their savings to buy things. When you want to buy more, don’t use your savings. Instead, focus on making more money.
6. How to Make More Money
When I talk about my system, where 60% of my income goes towards the necessities – there is usually one reaction I get from others. They tell me they can’t live from only 60% of their money.
When you are in a similar situation, there is one thing you can do about it. Upgrade your skills to make more. The number one thing I teach all my students is this: when you have income problems, it’s never a money problem. Instead, it’s a skill problem.
If you develop your skills and become able to provide more value to the marketplace your income will increase. Yet, what do most people do when they want more money? They would either get a second or even third job. Or, they plan to start a business.
Now, I think managing money will be so much easier for you if you develop a skill first. I usually call them high-income skills. High-income skills are always in demand and allow you to make money at will – once you mastered it.
While you focus on increasing your income, you also want to focus on keeping your habits for managing money in place. If you really need more than 60% for your living costs, don’t debunk the whole system. I would rather have you only put 1-2% in learning or investment, for example. This way, you still keep your management system in place. You just distribute the money differently.
7. How to Keep MoneyI always say, managing money isn’t about how much you make. It’s more important how much money you can keep. Click To Tweet
At the beginning of my career, I made some fatal mistakes. Suddenly, I was making all this money. I would buy a new car every year and I used my money to buy friendships. Every night I would blow three grand – and I don’t even drink. Only later I got much smarter. I noticed, while I was great at making money, I sucked at keeping it. So, I started consulting financial advisers and experts. Only then did I learn what it means to keep money.
Why am I telling you this? Because I want you to avoid my mistakes. Don’t spend stupid amounts of money and try to buy friendships. That’s not how real friendships work. Don’t become overconfident. If you are good at generating money, keep focusing on your cash flow.
When it comes to keeping your money, I also want to mention your credit card. Credit cards are amazing but make sure not to max them out every single month. I recommend to use them about 60-70%. What’s more, you want to pay them off every month. When you overspend and get into credit card debt you will struggle as the credit card interests are higher than your savings.
Why do you want to keep money? Well, part of it goes into your emergency savings and your savings for learning and growth. What’s more, you definitely want to have that extra money for investments.
8. How to Multiply Money
Multiplying money is the true mastery of managing money. And yet, most people have no idea about it. They don’t even get to this stage, because they can’t make or keep enough money.
Now, how do you multiply your money? The way to multiply your money and grow rich is through investments. When it comes to investing, do not get fancy. Don’t make it too complicated or sophisticated. If anything, you want to go with something very, very simple. All wealthy people I know invest in only a number of things. They invest their money into proven things, like real estate, index funds, the stock market or their own businesses.
That’s it. They aren’t chasing the latest investment trends they see on social media. They only invest in long-term proven investment vehicles.
Basic Investment Principles: Secrets of the Rich
When it comes to investing there are two critical things: your investment skill and your discipline. You have to know what you are doing and you need the discipline to stick to one investment strategy at a time. Don’t get the shiny object syndrome and chase after every new trend. You don’t need huge sums of money to start with investing. Again, you want to build your investment-habit early.
Now you might be wondering – does this mean you should put a little bit of money aside and invest in a low index fund? Yes. That’s exactly what I’m saying.
Most people want all these fancy techniques. But when you study how wealthy people invest, that’s not what they do. They build their business first. When the business produces cash and you already re-invested some money for business growth, only then they take that extra cash and put it into real estate. Simple as that.
My recommendation is, don’t wait to buy real estate. Buy real estate and wait. The best moment to buy real estate is when you have that little bit of extra money. When you have a bit of extra cash, take that money and put it into real estate.
Ready To Learn How The Rich Manage Their Money?
Have you ever wondered how the rich get rich and stay rich? The rich definitely know how to manage their money wisely.
Especially when it comes to investing, most wealthy people have closely-guarded secrets, such as investment secrets. I noticed when I reached a certain benchmark with my own income, new doors would open up to me. Other wealthy people would share their secrets and wealth strategies with me.
These kinds of strategies and secrets of the mega-wealthy aren’t published in any book or on any blog. The public usually wouldn’t know about it.
That’s why I decided to provide an exclusive 2 hour training, where you’ll discover how rich people think about money, and the major money myths that can keep you stuck in your financial situation with no way out.