Financial Independence: Putting Money in the Right Places

Several people earn a handsome amount per year, but they still struggle financially, especially when an emergency occurs. What can be the possible reason for it? Can one be careless about the money that they spend all on items like clothes and accessories? This is not the usual case as people sometimes don’t know where their money went.

It’s a simple case of mindless spending. You get your salary and don’t put a sufficient amount in savings or investment. Moreover, you shop from the same account that you use for savings. You buy groceries and clothes, pay bills and rent and buy all big and small that you may or may not need. What this does is you think you have a budget for things that you don’t need.

Think about it; you spend a lot of money on stuff for enjoyment. But when you need money for something important, such as a laptop, and you search for laptops that are on sale online, you might hesitate in making a decision. You might second-guess whether you need one or not, taking too long to reach a verdict.

You might be choosing things you don’t need over quality goods because you spend your money on what might be unnecessary. That’s why you should learn money management.

Where should you put your money?

  1. Necessities

This is the number one step you should do as soon as you get your salary. Set money aside for your necessities. This includes everything you require to live, such as food, electricity, shelter, transportation, and utilities. Keep in mind that this point strictly talks about your wants and not your needs. This doesn’t involve things like a TV or an AC.

  1. Emergency funds

You can set aside some money in an emergency fund. Suppose you’ve met an accident or have to get a tooth removed, but you don’t have any cash on you. What will you do then? This emergency fund is for those situations. Set aside $500, $1000, or even $10,000 depending on your salary, and don’t touch this money unless you need to. You can have this money deposited somewhere or have it in cash. But having this money in cash lying around in your apartment is not advisable, especially if you live in a big city.

  1. Stock investments

Here’s the point everybody wonders about. Investing in stocks is a great way to save and multiply your money. You can buy stocks and opt for the companies that pay you a dividend so that you can make money while earning profit from the market. A good idea would be to invest in Index Funds so that your money can be in the safe companies that are chosen based on their performance.

  1. Retirement funds

The only thing worse than getting old is getting old without money. You don’t want to be stuck in a situation where you’re old and don’t have the means to get the basic facilities up and running. The government has created many retirement investment plans where you can put some percentage of your income that will be given to you at the time of your retirement.

You can ask if your employer has provisions to invest this percentage of your salary even before it’s given to you. This way, you’ll never touch it. You might think you’re too young to save up for retirement, but that’s not the case. You can retire early if you save up enough.

  1. Real estate investments

This is the biggest bully in the investing world. Investing in real estate is what makes people rich. You can buy a house and flip it for a higher price by putting in some money and redecorating it. You can also buy real estate and turn them into Airbnb to make money while travelers stay in them. Investing in real estate is immensely profitable, but this is something that’s meant for people with bigger large paychecks. They can save money over time and then invest in properties.

Managing money is an essential skill that many people learn sometimes a little too late. Investing money comes at a later stage but saving up a percentage of it is necessary no matter how much you earn. You might think your lifestyle is the equivalent of your paycheck, but that’s not the case. In fact, this mindset will make you broke. Your lifestyle is the equivalent of what you save. You must save before you even start spending. That’s the only way you’ll have a good life filled with prosperity.

Also Read About: How To Find The Best Investments