If you are lucky enough and have been given a bag of money, what are you going to do? Spend all the money you have in the bag to buy whatever things you like? Go for holiday? Invest the money? This is what happened when someone wins in the lottery. When someone wins the lottery, the person will first invite relatives and friends for meal. If got extra, then buy something he/she or the family members want very much or take the money and go for gambling. I would say this is the standard way how people spend their money when strike lottery. How I know? This is secret, cannot tell you. =)
If people who strike the lottery have to learn cash management, people who does not strike the lottery even have to learn how to manage cash. A research has been done in US on 602 people between 18 to 34 years old. About 24% of them spend more than what they earn and 31% just enough to pay their expenses. If you can still save 10% of your income, congratulations, you are a lot better than around 50% of the people in US.
The birth of credit card has actually worsen some people's life. No doubt we do not have to bring a lot of cash with us if we have credit card. However, when you are buying things with credit card, you do not feel the pain when you are buying. You will feel the pain only when the statement is sent to you. How true is it? Maybe you can check with those who rely heavily on credit cards.
What need to be done when managing your cash? Well, one should have budget to manage their cash. Budget is a plan for saving and spending. Therefore, it will guide you on how much you can spend and how much you should save for the month. If you have cash machine that can print out money notes for you to do transaction legally, then it is really fine for you not to do any budget. But do you really have? When comes to budgeting, most of the people have fear on budgeting because they think that they have to sacrifice something when they are doing budgeting. This is not really true as you can still spend on anything you like as long as you have save the amount of money according to your budget. The money that you have to save is not RM 1 million or more, it is just 10% of your salary. Many great financial planners out there saying that pay yourself first before you pay to anyone and if you do not have enough to pay others, then make sure you can have your seond stream of income. What they mean by paying yourself is to pay yourself for the future instead of paying yourself now. In simpler term, it means that you should save money for future use instead of paying all your monthly income to house loan, car loan and others. If suddenly you need money urgently, at least you can still have
Budgeting is simply just a guide on how you should manage your income. How much of money should the individual save, invest and spend, maybe you can refer back to my previous post on saving. There are a lot of information of budgeting in the internet as well. What are you waiting for? Start your financial budget now. =)
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