Smart Ways To Manage Your Money Effectively In 2021

Investing Your Money

No matter our age, or what stage we are in our lives, saving money is incredibly beneficial to us. Whether you’re putting money away for college, or for your children’s studies, or if you’re saving for your first property, or even just saving up for your next vacation, at some point we will all experience the need to tighten our belts and start putting money aside.

Saving money is much easier if you’ve been managing your income effectively over time, but if you haven’t there’s no reason why you shouldn’t start doing so now. There are many ways for you to save your money as well as keep track of it and reduce your spending. We’ve put together a helpful list of things you should strongly consider when planning out your money management schemes and how you can effectively put them into practice.

Making Sense Of Your Spending

The first step in saving your money is by understanding exactly where your money goes after it enters your account. Having a grasp on this knowledge is the best foundation you can have before you start moving that money around and laying out budgets. First of all, identify all of your income streams. This is any guaranteed money that will be coming in monthly and note exactly when that money will be present in your account. Next, you’ll want to list all of your direct payments that leave you account monthly and yearly. Everything left over is money that can be spent relatively freely or saved for the future. Out of this though, you’ll want to put aside a portion for essential purchases such as groceries, as well as a significant amount for luxury and discretionary purchases. While these purchases will differ from person to person, it’s still important to try to enjoy your life and treat yourself every now and again. Saving money doesn’t mean you can’t spend anything; it just means you’ll have to be a bit more conscious of that spending. Whatever is left over at the end of each month is worth putting directly into your savings or investments.

Creating A Budget

As you go about taking notes of your monthly income and outgoings, it’s important to start drawing up plans for a budget. It’s at this time where it’s going to be worthwhile deciding on unnecessary spending that can be cut from your budget. Many individuals will make these sorts of sacrifices, and even large corporations do this all the time. You’d be surprised at how much money you can have left over once you make these cuts. This money can then be channeled into more useful savings. Before canceling anything, identify all of these unnecessary outgoings and add them up. Once you’ve seen how much you could save, consider adding those cuts to another area of your budget such as investments or even your discretionary or grocery fund if you’ve been quite strict on those. The whole aim of this sort of planning is to help you manage your money in a way that benefits you, whether it’s giving you a bigger budget for food or to provide you with more money to save and invest in your future.

Investing Your Money

As we’ve mentioned a few times now, investing your money is a brilliant thing to do with your excess income instead of leaving it in your bank account. There are many ways in which you can invest your money but getting started requires you to do a level of research to maximize your chances of success. Firstly, you’ll want to find out everything you can about investing money in stocks or commodities as trading is filled with jargon and can get quite overwhelming if you’re not careful. Once you’ve managed to get a good grasp on the subject, you’ll want to progress towards one of two routes. First, you could hire a financial advisor to guide you and invest your money for you. These experts have a solid understanding as to what will be a sound investment and what is too risky and will generally be quite smart with your money. However, it’s important to remember that they tend to take a percentage cut of any profits you make, as well as charging a fee per trade. Although, while that percentage cut will be an unfortunate loss, it does incentivize these experts to make smart trades as they benefit if you do well. A financial advisor may suggest that you consider buying stocks which provide shareholders with dividends. These are regular payments based off of a company’s profits and success. There are some great Canadian dividend stocks that you could check out, like these listed by Wealth Simple. These stocks tend to be from companies that are proven to be successful and are an incentive for shareholders to stick with that company instead of selling their shares, which provides the company with significant stability over time. You could also choose to do all of this alone and sign up for an online trading account. These systems are very useful in opening trading up to the wider public and give you the ability to buy and sell stock through a broker all on your own. This reduces the amount of wastage from hiring experts, although if you lack experience in trading, it can make for a stressful time, so make sure you’re prepared.

Diversifying Your Investment Portfolio

If you’ve chosen to start investing, it’s highly recommended you spread your investments out across multiple areas. When trading shares, it’s important to do so across different companies to both avoid losing all of your money on a bad investment, and to increase your chances of putting money into a hugely successful one. As well as this, it’s worth putting money into different markets, diversifying your portfolio even further. You could also invest in commodities like precious metals which tend to hold their value in the long term, or you could put money into things like cryptocurrencies, although it’s worth noting these can be significantly more volatile than other marketplaces.

Saving For Retirement

A common reason for people to put money away is in preparation for retirement and old age. Once we’re no longer able or willing to keep working and are looking for some respite after a busy life, having a healthy retirement fund will negate any money worries once that paycheck stops coming in. The great thing is though, you can keep trading in retirement with little effort, and if you’ve built up a strong portfolio, you’ll find that you don’t necessarily have to do much with it, especially if you hire a financial advisor to take over for you. As well as this, it’s still important to have some money outside of trading too, in the form of a pension or other high-interest savings account. While many businesses have pension plans which you can automatically pay into via your salary, it may also be worth having a separate account that you can put a bit of money into whenever you feel the need. Or better yet, set up an automatic payment so that you don’t forget to add money to your savings regularly. Work this into your budget where possible. While it may not be the most exciting thing to think about right now, your older self will be filled with gratitude when it’s time to retire from the world of work.

Emergency Funds

The creation of an emergency fund for you and your family is such a great idea for your security and peace of mind. This can be done in a similar way to other saving methods, but it’s imperative that you don’t touch this pot of money unless entirely necessary. This goes for everything from big luxury purchases to dipping in for groceries or nights out. While it may be frustrating to know that money is there and unable to be spent, it’s equally a relief knowing that money is there and hasn’t been touched when you truly need it. This could be for unexpected bills that you can’t afford such as house damage, medical and vet bills, or car repair. Make sure you keep that emergency fund topped up and don’t get caught out.

Don’t Take Your Eye Off The Ball

Once everything has fallen into place, you may find yourself letting your mind wander to other things in your life. However, when it comes to your money and your accounts, it’s very easy to let things slip and for errors to arise in your budgets. Maybe you become more frivolous once you have a great amount of money coming in. The downside to this is you can significantly lose sight of your budget, and then it’s time for you to go back to step one of making sense of your spending. No matter if you’re earning minimum wage or a six-figure salary, there are so many ways in which we can hemorrhage money if we’re not careful. And in fact, it’s much easier to waste money the more you have. Don’t allow yourself to lose track or you could even find yourself in some significant money troubles further down the line. Instead, keep a watchful eye on your finances and get into the habit of checking your budget daily, as well as noting down your spending so that you can keep track of it every month.