5 Ways to Manage Money

Finances are a big part of all of our lives. They allow us to purchase the things we want in our lives. To put it simply, money is very important. Many people strive towards their dreams while maintaining bad financial habits. Unfortunately, you can't do this because it's counterproductive to building wealth. However, with great financial habits and money management, you can optimally strive for and fulfill your dreams. Until then, you'll most likely come up short. It takes money to make money. In this article, I'm going to be breaking down 5 ways that you need to manage your money in order to fulfill your dreams. Let's get started!

1. Earn More than you Spend:

This one is pretty self-explanatory but many people fail to follow it. In America, around eighty percent of Americans are living paycheck to paycheck and even more people don't have one thousand dollars in savings. This is not a recipe for financial success. You should try and maximize income and minimize spending to the best of your ability. Make it a goal to set at least 15% of your money aside and put it into savings. This will ensure that you have money if things go wrong. 

2. Set a budget:

Every one of you should set a budget that is unique to that month. You need to track every dollar that comes in and know exactly where those dollars are going to be spent. As Dave Ramsey likes to put it "Every dollar has a name at the beginning of the month". This will ultimately allow you to track your spending and know where everything is going without confusion. If you maintain the discipline to stick to a budget and consistently track your cash flow, you'll put yourself in a better financial position moving forward. 

3. Know about compounding interest:

Compounding interest is one of the greatest things ever. Why is it so great? Well, the interest earned on your money continues to earn interest, not just the principal. This benefits the person who is still young and can invest early. The interest will compound over years and years, leaving you a big nest egg when retirement comes.

4. Invest in a retirement account:

Investing in a 401k through your employer or into a Roth IRA can be one of the smartest things you can do. As for a 401k, a lot of employers will match your contributions. For an IRA, it grows tax-free which dramatically impacts the wealth it provides. In your budget, find places where you can invest in these accounts, for they will pay off in the future. 

5. You are the CEO and your household is a business:

You have to start viewing your finances as a business. All in all, you want to see your net worth gradually increase as the years go by. If you increase your income, put that money to work instead of buying depreciating goods. This type of activity generally pays off in the future.

Yorkville Advisors, LLC is a privately owned hedge fund sponsor.