This is a follow up from last week on my upcoming book. Today, I am going to look at the snippet of what will be coming in my book and where to start with this managing money business. We find ourselves trapped in debts and at times we are not even aware of how we acquired it. Is it naivety or ignorance?
Managing money is a fairly discussed topic however, it seems like many people struggle to manage their money despite some earning really good salaries. Some people talk about how they are struggling to make ends meet and with the pandemic things have gone a bit worse than before.
However, the principles of managing money do not change with or without pandemic, maybe a few thoughts might be put into consideration due to pandemic to achieve better results. Managing money problems have been with us for a long time hence the reason why I embarked on a journey to write about it.
It is difficult to keep everything up to date however when it comes to personal finance, we have to commit and dedicate time to our money and there is no shortcut if one has to live a comfortable life.
So, let us look at our first initial problems in tying ourselves into debts.
Want versus Need
Want
Most of the time we get ourselves into debt due to our desire of wanting to attain something in life even when we are not in a position to afford it. We forget the priorities in life and just satisfy our egos. How many times have we gone on a shopping spree and bought clothes? Then get home and decide that we did not need that dress we just bought and the next step is a bin.
The word want is a horrible thing in some perspective, want is the desire to acquire something even when we cannot afford it. I want to have a nice fast-moving car however when I visited the shop it was extremely expensive. Never the less since I want that car, I must get it and therefore I entered the bank and applied for a loan to buy the car. The car provides me with a bit of comfort but it has also created a lot of stress since the loan has to be paid off whether I like it or not. My wanting, in this case, is not a priority, it is a self-satisfaction idea that I can survive in life without.
The lack of patience to enable saving and buy that car when the time is ripe could be one of the debt creations. Even when one can save, it can be impossible to buy a very expensive car since one’s income dictates how much a person can save and live a decent life at the same time.
Need
Need is an absolute necessity in life, Jane was living with her parents however she moved to a different city for work and she does not have a house to live in. Jane decided to look for a house near her workplace for rent to enable her to have a place to call home while building her career. A house in Jane’s case is a need and she cannot survive without having one. In a situation where Jane might not have the capital to put down for her house rent, it is justifiable for her to incur a debt to have a head start in her life. However, this debt has to be paid once she receives her first pay.
Where do we go astray with our money?
Lack of planning contributes to not being able to manage our money appropriately hence making the wrong decisions. A plan is a well thought organised document that outlines when and where the money is going to be used or allocated. This document is called a budget. However, one cannot budget if they do not know where they spend their money.
One might have the best budget but unless one has tracked their expenditure that budget might be useless and not achieve its intended objectives. Therefore, from my point of view budget is the second step in managing money and the priority is tracking that money down.
It would be nice to hear your views. Please let me know whether there is any topic you would like me to discuss about and I will be happy to share my views if it is in my area of expertise.