Central to the subject of personal finance is the concept of living within your means. In a nutshell, to live within your means is to spend less money than you earn. It's a basic concept which I'm sure most of us know and understand but for whatever reason we occasionally (or sometimes frequently) like to ignore it.
So many of the basic problems we all face with our money can be traced back to a failure to live within our means. High debt levels and minimal or non-existent savings are manifestations of the problem. And while you might be confident that you can make the repayments or borrow more money to cover any short-term cash flow problems, what if the unexpected happened.
In the current economic climate, the reality is that more people are losing their jobs. If you've managed to save some money and at least establish and emergency fund, you'll have a cash buffer if the worst happens. But if you've spent everything you ever earned (and then some) and suddenly you find yourself unemployed, would you be able to make ends meet?
Escalating credit card debt is a sure sign that you are living beyond your means. If the balance outstanding on your credit card is growing from month to month, it's probably time to take a step back and have a close look at your finances. How much money do you earn and how much do you spend? Be realistic about it. Remember if you're not saving any money and your debt levels are rising, there must be a shortfall somewhere.
Prepare a budget. Note down for a couple of months how much money you've spent and on what. You will probably be surprised. I know I am each time I go through that exercise.
Building wealth the old fashioned way requires you to establish a habit of saving. You'll be amazed at how quickly $50 or $100 put aside each week into a savings account will add up. Or alternatively, an extra $50 or $100 paid off the credit card will soon have it paid off and will free up the cash that was going in interest payments for use on other things.
What is the Money Management Personal Finance Blog about?
I have finally decided to start a Money Management and Personal Finance blog. After many months of reading the writings of other personal finance bloggers and many years of successfully managing my own finances, I thought I would share what I've learned with the world at large.
But before I start, I need to make one thing clear. I am not a professional financial planner or money manager. I am not qualified or licensed to offer personal financial advice. What I publish on this blog will be my own thoughts and ideas. There will be rantings and ramblings about my own experiences. I'll write explanations of things I've learned or feel strongly about.
So keep this in mind while reading what follows. I would suggest you seek professional advice before taking any major decisions. What appears on here is my own personal view and may not be suitable for some or all of my prospective readers out there. Having said that, I'm hoping that I can provoke some thought and discussion with some of my posts.
I intend to write about financial planning, budgeting, saving money, investing and different forms of debt. I don't have any real plan for what I will write about when. I will just write about whatever takes my fancy on a particular day, but over time I will try to organize my writings into some semblance of order - something fairly easy to navigate for newer readers.
Also, I have quite a lot of other projects on my plate, so my posting frequency wont be very high. I'm thinking about writing 2 - 3 times per week but I suspect this will vary as both my time available and my motivation fluctuate.
So you have been warned. Read these writings at your own risk. That's it for now. In my next post, I plan on writing something about money management or personal finance.