According to Robert Kiyosaki, the biggest difference between rich and poor people is not in the amount of money they have but in the way they handle their assets and liabilities. In the book Rich Dad, Poor Dad, he speaks about how rich people bounce back after a financial fiasco, while people who struggle financially sometimes fail to capitalize on great opportunities.
While some may find this insulting, the truth is that this is good news. You can turn your finances around by increasing your financial literacy. With that in mind and without further ado, here are the top nine things you need to do to handle your money better.
Story Stages
1. Get out of debt
Getting out of debt should be your first priority. Other than wasting money on interest rates, a debt will cause immense psychological pressure that you shouldn’t have to endure.
So, how do you get out of debt? The simplest way to do so is to start paying more. You need to either increase your monthly payments or make these payments more frequent. This is really the only way to get out of debt early.
There are various strategies, as well. For instance, while some suggest (a logical move) that you should pay off a debt with the highest interest first, others suggest that you want to pay off the smallest debt first. This way, you eliminate one of them from the list.
Also, keep in mind that consolidation generally gives great results. All in all, debt management is a huge factor whose significance you shouldn’t downplay.
2. Get the most out of your payday
While this may not sound right to you, the day of your paycheck is vital for your financial health. Many utility bills have a discount when you pay early on, but it’s even more important than that. Speculating with money that’s not really yours is never a good idea.
Knowing how to organize your money on the payday is vital for your long-term financial health.
You need to allocate a portion for fixed expenses and factor in variable expenses. Ideally, you want to automate your savings, but the same can be done for some of your recurring expenses. In general, you want to minimize the likelihood of a human error.
3. Start budgeting
You can’t out-earn a bad budget. In 2023, there’s so much to buy. No matter how affluent you are, you have so many opportunities to spend your money. This is, by far, the most dangerous if you don’t know how much you can afford to spend.
Today, you don’t even have to do it manually. You see, modern budgeting apps come equipped with OCR and NLP capabilities. This means they can recognize bills you take a photo of (even without scanning the QR code).
With a better budget, you’ll always have a good idea of how you stand financially and can afford your most important financial goals.
4. Avoid unnecessary loans
Getting a loan to buy a home or a car is fine. However, getting into massive credit card debt to get a new TV while the old one is still functional is not financially sensible.
The problem is that this may cause you to get stuck in a debt loop. This means you won’t be able to cover your debt, so you’ll get the next one to help you. This will increase the total debt and your monthly credit payments, putting you even more in debt.
The worse it gets, the worse your credit rating, which means that each subsequent loan will have even inferior terms.
Avoid payday loans at all costs since these have an APR of 300-500%.
5. Start investing
While you can just sit on your money, this will often result in higher taxes and put you at risk. At the very least, you’re not using the opportunity to turn this money into an investment profit. As the author of the book we’ve referenced in the introduction said, each dollar is a laborer working towards earning you a new Ferarri.
Depending on your investment goals, investment fund, and time at your disposal, you can buy stocks, futures, options, commodities, cryptocurrencies, and much more. In fact, even examining meme coin rankings and investing here can pay off in the long run.
The thing is that the sooner you start investing, the longer you get to collect the money.
6. Leverage technology
There are so many ways for you to save money using technology. First of all, we’ve already mentioned budgeting apps. However, there’s so much more. For instance, did you know that paying bills electronically is significantly cheaper than the alternative?
Then, you can use catalog apps to see which items are going on sale where. E-commerce is much more convenient for shopping, and it saves you gas, sometimes even providing you with an option for incredibly low prices. For instance, if you’re willing to wait up to 90 days for a delivery, you can get an item for a mere fraction of the price.
Lastly, some deals (like vacation deals) differ for people worldwide. The use of a VPN can help you get around this.
7. Plan major life events
Major life events are not just lifestyle choices, they’re also financial decisions. When you choose to have a child, you’re making the most important commitment in your life.
You’re creating a new human being whose future, aspirations and expenses you’re taking on as a financial responsibility. You need to start saving for their college, think about all the other expenses (even while they’re very young), and more.
Getting married, buying a new house, buying a new car, or starting your own business are all costly but life-changing affairs. It’s so important that you get ahead of this as best as you can. Don’t let these things just happen, actively plan for them.
8. Increase your income
It’s much easier to have healthier finances with a higher income. With a greater surplus, you can fill your emergency fund much quicker, emergency expenses won’t hurt you as hard, and you won’t have to live in such an austerity.
From a financial standpoint, there’s nothing wrong with austerity; the problem is that this kind of lifestyle is not sustainable in the long run.
Today, you have more options than ever to increase your income. First, you can find a side job a lot easier due to the nature of remote work, hybrid work, and gig economies. You can fit it into your schedule and avoid overextending to achieve this logistically.
Ideally, on the other hand, you would focus on passive income sources.
9. Sleep on your shopping list
Impulse purchases are always a bad idea. Sure, you may see a limited-time offer, but it doesn’t make it free just because something is on a discount. It also doesn’t mean that you need it to begin with. A 70% discount on an item you don’t need doesn’t mean you save 30%; it means losing those 70%.
Why not just sleep on it?
If you make a list, put it on the table, and reevaluate it the next day, you may be unable to recall how or why some items are even on the list.
This doesn’t just go for your grocery runs; the strategy applies to every purchase you intend to make soon.
The amount of money you have doesn’t matter if you’re consistently mishandling it
Ultimately, you need to understand that your finances are your responsibility. Even if someone were to give you great wealth magically, chances are you would squander it without proper guidance and knowledge on the subject matter. You cannot buy financial literacy but you can acquire it through a moderate time and effort investment.
