How To Manage Your Finances In Any Economic Condition

What living our life comfortably comes down to, are the choices we make. This includes the type of work we choose, the business we want to build, or the personal lifestyle we want to lead. What’s often overlooked is the connection these choices have with one another.

The fact remains, interdisciplinary thinking goes a long way. This might sound a bit obtuse for some, but know the most important life decisions you make, can be made a lot more easier and accurately, by thinking more basic and within your capabilities.

Our personal lives, are all about maximizing our utility, which is measuring our happiness and satisfaction, that’s gained or realized from being self sufficient.

Protecting Yourself In Any Economic Crisis

Once the media begins to rant that the economy is starting to depress, what most will do is become frantic and penny pinch.

Most worry about their immediate welfare, how they can sustain their current standard of living. How they can realize financial freedom because of the upcoming financial crisis.

What needs to be defined, is what the word economics actually mean.

This in terms of thinking about your own situation, and how you can benefit from it’s true definition, and then steer it to your financial advantage.

The Macro Economy

Begin by ignoring what the news says about the world economy. That the stock market is now in a bear market, that there’s too much demand on commodities and not enough supply.

That there’s rapid inflation, the spiraling mortgage defaults, and the ever increasing unemployment rate is raging out of control.

These are economic conditions you personally can’t really do anything about. All you can control, is the immediate economics in your own household.

Economics is the art of managing an entity, so it will remain sustainable. In your personal life, that’s something you can control.

All you can do in any condition, is manage your household finances the best you can, especially when it comes to money.

Make sure the economics of it, are flowing positive.

Spending Less Than More

Our grandparents didn’t earn that much money, so they lived frugally. They were conditioned to keep their spending less than what they earned.

It’s been proven the fastest way to financial disaster, is spending more money than you take in.

Know it’s possible to maintain your current standard of living, while cutting down on your expenses.

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For instance, you can choose to watch a movie at home, rather than going to the movie theater. Choose to buy a used car, rather than a brand new one.

Try To Pay Cash For Everything

Every time you use your credit card, and you’re not able to pay it off before its due date, what you’re doing is committing your future earnings, your positive cash flow and giving it to the credit card company with interest.

These are the future earnings, that should be going into your regular household expenses, your savings account, or that well deserved vacation. But what you’re becoming instead, is a victim to debt.

The only money you owe, should be in a form of a mortgage by buying real estate, which is guaranteed to increase in value. The other is a car, as most can’t pay cash for one.

When paying cash especially for larger items, try negotiating for a cash discount. Once the economy happens to go into a tailspin, and credit becomes difficult to get, this is when cash becomes king.

Saving For The Future

Begin by writing down your short and long term financial goals. Note the reason why you need to save a certain amount of money, such as for a down payment on your first home.

It could also be to save for retirement, for a rainy day or to pay for post secondary education for your kids.

Give each financial goal a dollar amount, as well as a time frame.

In order to properly save money, you need to know exactly what you’re saving for. You need to have a valid reason, why you’re putting your money aside.

Make sure you create a separate savings account each. Realize just leaving that money in the checking account doesn’t work, as you’ll find a way to spend it somehow.

Also make sure you’re able to easily make deposits into that savings account, or transfer money into it.

Banks can set up automatic deposits on a monthly basis, so you’ll never see that money in your hand. The easiest way, is treating it like another monthly expense.

Then Watch The Money Grow

Over time, what you’ll see is your money starting to accumulate, which is both rewarding and motivating. You’ll then want to save even more. Saving and investing, can then become a habit in a positive way.

What you need, is a conservative yet reasonable budget that’s written down. Then you need to track exactly where your incoming money is going out, so you can make adjustments on how you spend.

Having a budget tells you how you can manage your money, and help you to delegate. What budgeting needs however is discipline, but never sacrifice your current lifestyle.

It’s just a personal savings plan, to get where you’re financially going.

Eliminate All Your Debt

If you have any debt other than a mortgage, first focus on eliminating it as soon as possible. Also put away a small amount aside, this for unforeseen emergencies. The majority of it, needs to reduce your debt.

The reason why you should do this, is there’s no point paying 20% percent interest on credit card debt, when all your savings does is earns you 2% to 5% percent interest.

So eliminate anything you owe first, before you begin saving and investing.

Getting Into The Habit Of Saving

After a while, what you’ll begin is to systematically contribute towards your savings account, this by habitually putting all excess money you generate, into that savings or investing account.

This could be found money such as an inheritance, bonuses, raises, and any other unexpected forms of money, that can go towards saving.

It also won’t compromise your lifestyle, as it’s money that was unexpected.

There’s no secret to saving money. All that you need is to just start doing it.

What’s often the most difficult, is having the discipline to make it a habit. But once you begin to see your finances grow and gain momentum, you’ll become hooked on saving for a brighter future.