How to Manage your Finances

I have previously discussed options on where you can put your money. But before jumping into the sea, one should do a financial checkup to determine whether or not you are ready to invest.

Image courtesy of KROMKRATHOG / FreeDigitalPhotos.net

I have created a simple template for you to be able to check how much money you have left based on your income, savings and expenses.

In the finance management template, list down how much you earn monthly, your actual/latest investment value, and other income. Savings and/or investment is separated from the expenses for you to visually see money you have but are not readily available anytime. Insurance is also treated as an expense for you to build the mindset that it is considered an obligation to pay.

Once you have filled up everything, you can then figure out if you have money left. Based on that amount, you can now determine if you can start investing.

What to save for first?

• It is important to be able to save up for your emergency fund first. If you are still single, you can start saving at least 3 months worth of your salary. If you are married and with children, it is advisable to have at least 6 months worth of your salary.
• Next, you need to protect yourself so you need to have an insurance. Luckily, there are now policies that offer to have both insurance and investment in one. Having such a policy will not only cover for your protection, but will also become your fund for your future children's education or for your retirement in the next 10-15 years when you need it.
• If you're planning on buying a car or house within the next 5 years, you can start investing in mutual fonds and/or stock market. But please be advised that investing in these vehicles entail risks because the stock market constantly fluctuates - that is why one should invests only for the long run and not do day trading.

Now knowing the basics, it is time for you to take action and take control of your finances. =)

You may also check out PAMI's online tool to check your financial health: My Financial Diagnosis

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