SEVEN PRINCIPLES TO MANAGE YOUR MONEY

 

In times of austerity it is critical to use your money as efficiently as possible, so that you end up with more of it. The seven principles detailed here provide a framework for taking control of your money, and making it work harder for you.

 

1.      Live Below Your Means

 

The richest man in the world drives a modest car and lives in a modest house. Warren Buffet is not known for his lavish lifestyle. The lesson is obvious. Live below your means.

 

2.      Mandatory And Flexible Expenditure

 

‘People are living longer than ever before, a phenomenon undoubtedly made necessary by the 30-year mortgage.’ 

Doug Larson

 

A foreign holiday is flexible, you don’t have to pay that bill. Your mortgage, or your car insurance (if you have both), is mandatory, at least unless you sell both.

 

3.      Learn How To Budget

 

‘Budget: Mathematical confirmation of your suspicions.’

  A.A. Latimer

 

Work out what your total income is, then work out what your total out-goings are. The latter should be less than the former or you are heading for trouble. If that is the case, and even if it’s not, remember the first principle. We can all reduce our expenditure by making tough choices. Target your flexible expenditure first, then reassess your mandatory expenditure.

 

4.      Have A Flexible Plan

 

Your financial plans need to be flexible to accommodate change. It is prudent to hope for the best but expect the worst. Your plans should be able to accommodate both.

 

5.      There Is No Such Thing As Spare Change

 

Pay attention to your money, to a very detailed level. Small grey areas of expenditure can add up. Some years ago I surprised myself when I calculated that the amount I was spending on take-out coffee would have paid my monthly heating bill. Saving money is making money.

 

‘Beware of little expenses; a small leak will sink a great ship.’

Benjamin Franklin

 

6.      Buy Things With Yellow Labels

 

Buy bargains. A bargain is not the same thing as something that is ‘cheap’. I recently bought a lobster close to its sell-by date for 50p. Unlike the lobster I survived just fine, and had what should have been an expensive meal for a student budget price. My average weekly food bill for a family is less than half the norm. How? I target the supermarket after 7pm and buy lots of items with yellow ‘reduced’ labels on them. Whilst this may be a talking point amongst my amused friends, it pays my council tax bill.

 

7.      Create A Money Engine

 

Manage your money, and if you invest your money wisely it will compound. It may seem a slow process as compounding takes time, but once your money hits a critical mass you will start to see how money can make its own ‘money engine’. Like growing a tree, eventually it can start to support itself.

 

 

Jamie E Smith is the author of ‘Making Money From Stocks And Shares’.

 

 

 

This content was provided by one of our users, Jamie