The Real Meaning of Money Management – Easy Reader

 Kevin Cody

People toss the term money management around far too often. Lately, it’s used so loosely in financial literature that its older, original meaning has almost been lost. Once upon a time it referred to the way in which individuals kept an eye on their income, and how they earned income or interest from excess funds. Sticking to the basics of the concept means knowing where your money comes from, where every dollar goes, how to put some of it to work for you, and how to be ready for a temporary shortfall. Here’s more about each of the key concepts behind the authentic philosophy of managing what you earn.

Make the Dollars Work for You

Making money work means being certain that all excess wealth earns interest or brings in a return of some kind, perhaps via investing in the market. It’s a simple idea that is ignored by many working adults every day of the year. For whatever reason, people let their hard-earned income wallow in savings accounts that pay next to zero interest, stuff it in safe deposit boxes, or let it accumulate in checking accounts. The solution is to have multiple locations for excess wealth. Consider putting a fixed percentage into the stock market, purchasing precious metals, or acquiring a small real estate portfolio.

Save Like You Mean It

You’ll never be able to invest or take advantage of a great real estate deal if you don’t save regularly. Develop the habit early, and don’t worry about the amount at first. Later on, set a fixed percent of each paycheck to go toward savings. That doesn’t mean a savings account that earns one-half of one percent annually. It means any of the several places you’ve created for growing those sums over time.

Trade Stocks Wisely

For new or experienced investors, one of the more effective ways of creating wealth is through the stock market, and learning which penny stocks to buy can give you a good place to start. These low-cost securities are available to anyone, and a good number of them are highly rated shares issued by well-known firms. You’ll hear all sorts of definitions, but the most common one sets the cutoff point of what a penny stock is at no greater than $5 per share. An excellent way to get started is to do research on several companies that issue pennies and whittle down your list to five or six worthy candidates. Trading stocks wisely means never putting more than two percent of your entire trading bankroll into an individual transaction.

Know Where Every Dollar Goes

One of the oldest budgeting cautions is to know where every dollar goes. The modern version of the saying uses the word dollar instead, but the basic meaning is the same. When you build a monthly budget, create expense categories that reflect reality. Keeping all your receipts, for every act of spending, for an entire month is a good way to prepare for making a sensible budget. The logic is flawless in that if you know all your expense categories in detail, you’ll never wonder where your paycheck went or why you don’t have enough in savings.

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