15 Ways To OPTIMIZE Your MONEY
They say money can't buy you happiness, but it certainly can come as close as possible to doing so. Having your finances in order brings you a sense of peace and security because you know there's always a backup plan. On the other hand, when your finances are not in order, it can feel like you're one step away from disaster.
To avoid being in the category of the latter, we have once again brought you practical financial tips to help you out. Curious? Well, here are 15 ways to optimize your money. Welcome to alux.com, the place where future billionaires come to get inspired.
Number one: Build an emergency fund. Planning for unexpected expenses is one of the best ways to manage your money. An emergency fund can be critical. You never know when an emergency will come up, but you can prepare for it by having extra money set aside. The fund is created to help you pay for things that would not be in your normal budget. It could also help you to pay for your usual expenses if your income is interrupted. Having an emergency fund means you're always ready for whatever unexpected expense life throws at you, and you don't have to go into debt trying to make your way out of this situation. It's one of the most financially intelligent decisions you can make with your money.
Number two: Track your spending. Knowing where your money goes is the first step to optimizing your finances. If you don't know what and where you're spending each month, there's a good chance your spending habits have room for improvement. Better money management starts with better spending awareness. Like with most things in life, you can't make progress without knowing where you stand. What are your spending habits? Where are you overspending? Are you on the right track? Knowing all of these is important so you can make adjustments when and where necessary.
Number three: Increase your income. When discussing finances and financial growth, much emphasis is usually placed on savings and investments, and with good reason too. However, income and earning power are often relegated to the background. Many financial tips depend on how much you earn, so the number one way to optimize your finances would be to increase your income. If you think you're not making enough, consider negotiating your salary. Approach your superiors with data backing up your claims for a raise and see what they offer you. You could also consider picking up a side hustle. A lucrative side hustle can help you to improve your finances, and the beautiful thing about side hustles is you could earn even more than what you're making at your usual job; at some point, it could even replace your usual job.
Number four: Create a budget. Having a periodic budget is one of the top ways to get the best out of your finances. Having a realistic plan on how and where to spend your money will work wonders for you. Use your monthly spending habits and take-home pay to set up a budget you know you can keep. Prioritize what you want to spend your money on and stick to it. A budgeting rule that works pretty well is the 50/30/20 rule. This rule helps you divide your expenditures into three categories: needs, wants, and savings. That is fifty percent of your salary goes toward needs, thirty to wants, and twenty percent to savings or investments. It's a great way to budget and manage your spending.
Number five: Be frugal. When you start progressing on your financial goals or get your big financial break, resist the urge to splurge and instead opt to be frugal. The less you spend now on things that won't give you a financial return, the more you'll have to invest later. Check in with every service and subscription you use to ensure you get the best deals. If you're aware of a competitor with a better offer, well, switch to the competitor. Get the best and most affordable deals you can. You never know how much impact the little you save from your budget can have. It's important to be frugal with your spending, even if you don't have to be that way. You have a lot more money to save and invest.
Speaking of which, number six: Save. At this point, you're probably sick of hearing this, but there's a good reason this piece of financial advice is repeated so much it makes you sick. Saving money is one of the vital aspects of having a secure financial future and building wealth. Having savings helps you to navigate risky situations rather than borrowing money at high interest rates. The interest rates on saving your money make it even more worth it. Find a plan that works for you, either with a bank or financial platform, and save as much as possible from your monthly income. Set a monthly savings goal for your net income and increase it over time. When you get a raise, bump your savings contributions up accordingly. Small increases in savings can lead to significant results when interest rates are set in.
Number seven: Manage lifestyle creep. Most people will spend more money if they have more money to spend. As people progress in their careers and earn higher, there tends to be a simultaneous increase in spending, a phenomenon known as lifestyle creep or lifestyle inflation. As your professional and personal situation evolves, some increases in spending are natural; but lifestyle inflation is a problem because you start to see former luxuries as necessities simply because you can afford them. You begin to splurge on sports cars, yachts, and vacation homes that you barely need or will barely use. This can be damaging because it restricts your ability to build wealth. Avoiding lifestyle creep is a good way to make the best of your money because you have a much higher income and more money to save and invest.
Number eight: Find your money drain and plug it. Always take a look at your spending. Pay close attention to expenses that are either unnecessary or the ones you can cut out of your monthly budget. Sit down with your statements and bills and figure out where your money is going. Do you eat out a lot? Entertain too much? Shop too often, even when you don't need anything? If you've got a habit unnecessarily costing you big or small amounts of money, find a way to plug that leak. Stop thinking it won't make a difference and realize that even the little things add up to the big bucks down the road. Even cutting an expense of just twenty dollars consistently could lead to a savings of two hundred and forty dollars a year.
Number nine: Protect your money from inflation. Inflation is a common phenomenon in the world. The prices of goods seem to be rising, and the purchasing power of money is falling. As a consequence, high inflation rates continue to drive up the cost of essentials but also eat away at your savings. When inflation strikes, it's always essential to have strategies in place to combat inflation, so the effect of it is minimal on your finances. Now, there are several options to protect your money against inflation, but the most effective alternative is investing and diversifying your investment portfolio. Investing in stocks and real estate is a highly recommended strategy for keeping up with inflation, and if you've got a lot of skills to bring to the table, you could even ask for a raise at your job.
Number ten: Read finance books. Today's information about investing, saving, and retirement is readily available online and in libraries, thanks to books and the internet. Studying and understanding investments and financial markets is so much easier. These books have massive knowledge and are there for the taking. Pick up a financial book today, study them, and apply the knowledge that you get. Your finances will be very grateful for it.
Number eleven: Prioritize resale value. This financial tip is not spoken about enough, even though it's made many people rich. There are lots of individuals and businesses that make a lot of money from reselling items they got for cheap. Although we're not saying this is something you should do immediately to turn into a business idea, we think it's a brilliant tactic to optimize your money and one that should be incorporated into our personal lives. Whenever you're purchasing an item, you should always consider the resale value of that item. Do your research and pick an item that doesn't depreciate in value so if you eventually decide to sell it, you could make as much money as you did when you bought it, or even more. Prioritize items with a good resale value.
Number twelve: Cut back on reoccurring charges. A lot of products and services these days come with recurring charges that you have to pay periodically. Now, it's easy to forget subscriptions to these services, even when you don't use them regularly. The peculiar thing about these services is whether you're actively using these subscriptions or not doesn't matter. You will continue to be billed on your card as long as that subscription is valid. To make the best of your money, you have to assess your spending for charges like these and contemplate canceling unnecessary subscriptions so you can divert these funds to a more reasonable cause each month.
Number thirteen: Recognize needs and wants. The line between wants and needs is often blurred for most people, and because of that, they overspend on luxuries thinking they are needs. Now, needs are things you must have for your survival: food, shelter, health care, and a reasonable amount of clothing. Wants are things you desire but don't require for survival. These costs could be rooted in our daily lives, making them feel like needs. But your needs should be the priority in your budget. You can allocate any income toward wants only after your needs have been met. Even then, you don't have to spend all your leftover income on wants. When there's no clear definition, people tend to make poor financial decisions, like splurging on items that do not count as needs.
Number fourteen: Invest. Even if your ability to invest is restricted, small contributions to investments can help you to use your money to generate much more. If you hit the jackpot with your investments, you could even have enough money to no longer have to work for life. Investments are a great way to build wealth, but you have to work to ensure you invest smartly. Investing makes it easier for you to build wealth and manage inflation. Smart investing, though, is one of the surest ways to make the most out of your money.
Number fifteen: Use wealth management tools. Nowadays, everything in our world is being overtaken by technology, and financial management is not left out of the equation. In fact, it's difficult to imagine financial planning and portfolio management without technology. It's smart to incorporate wealth management tools into your routine. Look for tools that help you analyze, calculate, and track your money. Plenty of great free options exist online. Even financial advisors use these tools, and without these helpful tools, you may find it harder to make actual financial progress or gain the maximum benefit from your money.
At the end of the day, alux or financial knowledge is really important. To make progress, you have to understand the market and the forces behind it. Apart from knowing the ways to optimize your money, you also need skills to scale through the financial world.
So sit back and relax, because up next, there's 15 basic money skills everyone should know. Thank you for watching this video a-lux. If you found it valuable, consider subscribing to our channel and joining our awesome community. If you're still hungry for more, we hand-picked this video for you to watch next or head over to our website for more amazing content.