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A Beginner’s Guide to Managing Finance

Finance

For beginners or young adults, who have just set foot to manage finances, it is an accomplishment in itself. With the excitement of managing finances, comes the anxiety to do so in the right way, to make good use of hard-earned money. Although no colleges formally teach and train students on money management, young youths and adults need to take care of their finances. Here is a small beginner’s guide to help people in the situation.

Creating a Budget

A hefty sum of the first paycheck can set people on a shopping spree, but it is essential to create a budget and manage every penny from day one. This not only prevents from unnecessary spending but also makes money management more effortless. Apart from managing the cash flow, creating a budget will also help in keeping track of the recurring and infrequent expenses.

Budget

Paying off bills and debts

If you own a credit card, or you’re forced to create a debt for some essential and necessary circumstances, then it is always wise to pay the bills and obligations before you invest in saving your money or spend it on something else which you require. If you own more than one credit card, then pay the one’s that offer the highest cut, while paying the minimum manageable amount on the others. By doing this, you make sure you pay all your bills on time, whilst abiding by the terms and agreements of the company.

Learn about taxes

Understanding the process of income tax and their payment is a tedious and daunting process. For someone aware of how the taxes are paid, it is a piece of cake, whereas, for the others, it requires some homework. Also, make sure that the financial aspirations and obligations can be met after the tax payment.

Starting an emergency fund

An emergency fund is a crucial stage of managing any kind of expenses. It is always wise to be prepared for uncalled or emergency expenses, which might result in unavoidable financial implications otherwise. These emergency funds can be useful in times of predicaments like illness, death, accidents, family issues and even loss of a job.

Exercise self-control

It is especially vital and handy when people are living off their own hard-earned money. Essential expenses are obviously non-negotiable and are a mandatory, however by setting the priorities straight about the necessities and luxury. It will prevent anyone from being “broke” in times of need.

Conclusion

Although money management or financial management looks like a daunting process, in the beginning, it is an essential skill and can be mastered only with time. By taking the time to master this art will pay off, literally in the long. It is necessary to pay the bills and taxes in time to avoid any fines on them, and the remaining money after the essentials can be saved for an emergency. Leisure money must be managed separately as well.

A Beginner’s Guide to Financial Investments

Financial Investments

If you’ve just decided to begin your investment journey and do not know the basics, then stick till the end because we have jotted down some points that will get you started with the money you wish to manage.

Before you begin investing your money, you have to take some time out to understand the market and the key terms and concepts.

Why investment?

There are various reasons as to why a person should invest money, and it merely depends on personal purposes. However, one common reason to invest money is to gain wealth. According to certain studies, the stock market returns 9% every year. For example, if you invest $10,000 at a particular return rate for 40 years, then by the end of 40 years you have $315,000. Hence, it can help you gain wealth and achieve your financial goals in the long run.

investment

Investment amount

Beginners often wonder, how much to invest and there is no cut out the answer or this question. It solely depends on your goals and what you want to achieve by the end of x years. However, we can suggest you choose a plan that involves the investment of at least 10% of your income. The sooner, the better.

Different types of investments

There are thousands of aspects and fields you can invest in, from stocks to collectable coins and many more. We’re going to concentrate only on the one in your retirement plan or the brokerage account

  • Stocks: It is also known as equity as it is the particular ownership of a company.  If the company does well, then the stocks will increase, and the investment is usually made in the stock market.
  • Bonds: They’re called the fixed-income investments, which creates a stream of income. The advantage is that they’re more stable than the stocks but offer a lesser return potential.
  • Cash: It includes investment in the money markets and the savings account. Despite having the lowest risk, they also offer the lowest potential.
  • Mutual Funds and Exchange Traded Funds (ETF’s): It is a type of investment where the money is pooled from a various assortment of stocks and bonds and make up the index.

Active v/s passive investment

There are two types of investing methods- active and passive investments

Active: Active investments are the ones that are made on mutual funds or picking individual stocks or bonds, that are mainly managed by professionals.

Passive: Passive investing is one to match the performance of the market by tracking it through the indexes.

Choosing one of the investing techniques depends on the time you want to spend on investing. If you’re going to do it for a longer run, then active is the one to go. Otherwise, you can choose passive investing methods.

investment

The process to get started.

  • Once you’re theoretically familiar with the procedures and basics, set a game-plan.
  • Open a brokerage account and work on putting your plan to action.
  • As a beginner, it is essential to choose a brokerage that offers access to investment and all the educational features.