How to manage your money wisely: 8 underrated tips from experts


Those who struggle to live paycheck to paycheck look at those who successfully invest in securities as financial gurus. In fact, everyone can invest their own funds wisely. To do this, you just need to take a number of specific steps, and most importantly — learn how to behave correctly. Indeed, most often it is the behavior of people that prevents them from saving money and, by investing in stocks, getting a good income.

The article will be useful to those who dream of learning how to save without making serious sacrifices, get rid of loans, start saving money and increase savings.

Remember: you cannot predict the future.

There is no completely safe investment. Everything changes over time. And trying to predict the future growth of stocks, based on data that they have been up so far, is about the same as guessing which side of a flipped coin will fall up, given that the last time headed. The previous result does not guarantee anything.

But this knowledge should not paralyze you. If you are going to invest your money and want to make a decision with common sense rather than dim prospects, make a plan. Not a 200-page treatise that you never even have time to reread, but a shortlist of actions that will fit on a small card.

Answer the question of what money means to you.

For many, financial planning seems so time-consuming that their first reaction is to throw up their hands and start begging an expert to tell them what to do. No specialist is capable of giving universal and effective advice.

The financial situation of each person is unique because the goals are unique. Every time we are not talking about abstract dreams … but about the concrete ideas of each about a safe pension and a good education for children. And if what brings joy to your neighbor cannot make you happy, then someone else’s financial plan will not work in your case either.

Therefore, the first (and most important) question you should ask yourself is, “What does money mean to me?” For some, they are synonymous with security or opportunities, for others — the equivalent of freedom. Once you have formulated your unique answer, think about what your real goals, time horizons, and level of risk tolerance are, and what you are willing to change.

Once you’ve identified your goals, choose the three largest ones. And every time you think about investments, ask yourself if they will help you achieve those goals.

Don’t be led by your emotions.

Acting like others makes us feel safe. That is why we buy securities that are expensive in the hope that they will rise further and sell stocks when they begin to fall in fear. We can hold the employer’s stock because we are loyal, or sell a stock because it’s … funny. This behavior is more like gambling. It’s exciting, but you yourself would hardly advise someone to play at a casino to save money for the future.

Investing is not fun. They should always be aligned with your goals and principles, and not based on feelings about what will happen. Don’t play the stock market.

Use the 72-hour test.

Of course, you can think about where to invest your money when you have it. And what if they are not there? The answer is obvious: you need to start spending less. And there is a dead easy way for that! Fortunately for you, in the modern world with its online stores, where you can buy almost anything “in one click”, they have come up with an excellent tool that allows you to control costs. It’s called the basket.

Let’s be honest: from what you order from online stores, very few items need to be purchased immediately. Therefore, make it a rule to leave items in your shopping cart for 72 hours. After looking there three days later, ask yourself: what is more important — these things in the basket or getting closer to achieving the financial goals set? And without regret, delete what you can do.

This technique works great, as it allows you, on the one hand, not to immediately say no to purchases, and on the other hand, not to make purchases under the influence of emotions.

Automate good behavior

The easiest way to avoid making stupid financial decisions is not to make them at all. Personal accounts on the banks’ website and mobile applications allow you to automate most of your day-to-day operations.

Rather than forcing yourself to make the same decisions over and over again, automate them so your good intentions turn into good behavior. You can automate the payment of your pension fund contributions or simply to a savings account, but not only. It is better if auto payments are also configured for a mortgage and car loan repayment. The essence of the procedure is that the necessary write-offs from the account without your participation will relieve you of the agonizing desire to postpone the payment by spending money on something else.

As you start spending less and save painlessly, evaluate how profitable your past investment was.

Use the night test.

Acting as planned will help you tidy up your running costs. But past investments may have been made without considering your financial goals, under the influence of emotions, or under the influence of acquaintances. Therefore, sooner or later, you will have to deal with previous investments.

To do this, imagine that overnight all your investments were returned to you in cash. And ask yourself what kind of investment you would re-make on the same terms and without loss. All contributions that fail this test should be redirected.

Stick to basic investing rules

1. Pay on loans on time.

2. Try to repay loans faster. When the debt is gone, you don’t have to pay interest on it.

3. Distribute attachments. The point of diversification is to combine investments, each of which carries risks in itself. Combinations like these are often less risky than their components and generate more revenue.

When you bet on ‘systemic risk’, it means that you are investing in the concept of capitalism in general. It is based on the statement that, despite the ups and downs of the market … it still continues to grow. Therefore, you should invest in stocks of different companies. Of course, some of them will close, but this will not affect you much, as others will develop, and their shares will rise.

Mutual funds, which distribute investments among different enterprises, are much more profitable than individual stocks. When choosing mutual funds, remember to check your short financial plan.

Be ignorant and lazy.

A huge mistake is made by those who read too much financial news that encourages buying, selling, or other similar gambling activities. Remember, you cannot predict the future.

Experts also cannot, but they make predictions since this is their job. So ignore the financial news. Pay attention only to what can affect the achievement of your goals and what you can control.

Someone will say: “But what about the ‘black swans’? If people paid attention to details in time, they could avoid serious crises! “ These objections have been answered by economists at Oxford and New York Universities. In the course of a study in 2010, they came to the conclusion that almost no one listens to experts who correctly predict the most unexpected events.

A quick guide to action.

Leaving aside the arguments and reasoning, you get the following list of recommendations for those who want to learn how to properly manage their money.

1. Don’t try to predict the future — it’s impossible. And an attempt to invest — based on the analysis of past events, gambling — has nothing to do with investing.

2. Determine what money means to you and set your financial goals with this in mind. Make a simple plan and make sure your investment is subservient to it.

3. Do not act under the influence of strong emotions. Investing wisely is boring and should always be. Don’t gamble on the market.

4. Use the 72-hour test. Buy any items of your choice, other than essential items, after three days. This will help avoid impulsive spending.

5. Automate good behavior. This is the best way to maintain it.

6. Use a night test. If all your investment returns to you in cash, what investment will you repeat? Money that has been invested unsuccessfully can be invested differently.

7. Rely on the basic investment rules: pay on loans on time, try to repay loans ahead of schedule, invest in different assets.

8. Be ignorant and lazy. The flow of information pushes you to act impulsively, which is always bad for investment. If your money is already working, why bother it?

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