As a financial advisor, my daily interactions circle around how people want to get rich and find new & exciting ways to expand their wealth. Well, nothing wrong here. Money management is an important life skill that one should practice. With the right strategy and guidance, you can grow your wealth and achieve your goals and dreams in life.
So, in this blog, I highlight five methods that will encourage you to build a healthy money management routine for a comfortable and secure present & future.
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1. Your Financial Plan Should Be Unique To You
Your life journey is different from others, so why should your financial plan be the same as others? While this might sound obvious, I’ve often heard of cases where people have followed the crowd and ended up with losses rather than gains.
Your money management style will always be unique, no matter how tempted you might feel about joining the herd. After all, no two needs, earnings, and expenses can match dollar by dollar. Correct? It’s simple: Stay in your financial lane, be curious to learn more about money management, and apply it gradually in your life!
One of the basic money management rules advises you always to spend less than you earn. This is the first rule to financial success.
2. Intelligently Invest For The Long Term
The concept of money management expands beyond the basic earn and spend rule.
As a finance professional, I insist my clients to invest for a secure future. As history has proven, investing should become a compulsory part of everyday money management. Depending on your life goals, risk appetite, and investible surplus – there are multiple investment opportunities in the UAE and globally to invest in.
However, don’t invest with the expectations of generating quick returns or doubling your money overnight. I strongly advise you to keep a long-term vision in mind when you enter this space, say 3-7 years. Give your money time to grow gradually in the markets because success in investing does not come overnight. It takes discipline, due diligence and patience.
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3. Diversify, Diversify, Diversify
An essential English lesson learned in school has stayed with me throughout my financial advising career: Don’t put all of your eggs in one basket. This logic is relevant in the investing space.
No matter which investment instrument you trust your money with, your money is always at risk due to factors not in your control. However, one of the most foolproof ways to follow healthy money management is to diversify your investment portfolio. Investing in multiple instruments across asset classes reduces your chances of facing extreme losses.
4. Set Realistic Goals
Setting financial goals is essential. When you can visualize your goals, you tend to work harder to achieve them. The same goes for financial goals.
Money management is a tricky space. Once you begin, you will experience the urge to take on more risk, but risk tolerance differs across people. In my experience no one likes to lose money. So instead, set practical goals for yourself, start slow, and keep track of your investment’s performance.
Take baby steps and once you master them, take a long jump.
5. Plan Professionally For Your Future
Regardless of your present age, financial goals like planning for children’s education costs, life insurance expenses and retirement planning, demand you need to seek professional help.
Money management is a full-time job. It isn’t easy and needs professional expertise to show decent results. While it is tempting (and easy) to go online and buy stocks and other products in today’s day, rarely is that a recipe for success. Yes, you might make money, but in the long run, you will need to seek professional advice to build a portfolio and manage money in a way that assist you with achieving your financial goals.