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Money management: how tough is it?

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Do you also believe that managing money is harder than earning it? Well, many agree. Let’s begin with what leads to money mismanagement?

  1. High cost of living: The cost of living is the amount of money needed to cover basic expenses such as housing, food, taxes, and healthcare in a certain place and time period. The cost of living is often used to compare how expensive it is to live in one city versus another. The cost of living is tied to wages. A high cost of living means you have to spend a major portion of your income to maintain that standard.
  2. Too much debt: If your consumer debts (credit cards, medical bills, and personal loans) total half or more of your income, you have too much debt.
  3. Overspending: Overspending is spending more money than one can afford. It is a common problem when easy credit is available.
  4. Lifestyle inflation: It refers to an increase in spending when an individual's income goes up. Lifestyle inflation tends to become greater every time an individual gets a raise and can make it difficult to get out of debt, save for retirement, or meet other big-picture financial goals. Lifestyle inflation is what causes people to get stuck in a cycle of living paycheck to paycheck, where they have just enough money to pay the bills every month.
  5. Lack of budget: an insufficiency, shortage, or absence of money required or desired.

So how can you save yourself from this situation?

  1. Analyze, understand, and accept your current financial situation: The earlier you start the practice of tracking your earnings and expenses, the happier you will be in the future.
  2. Sort your priorities: It is impossible to have everything, no matter how much money you have. Make choices.
  3. Establish your financial goals: Know when and how much money you will need.
  4. Create and stick to a budget: Calculate and allocate your needs and desires.
  5. Establish an emergency fund: Always, always save for the unexpected.
  6. Save for retirement: Save for the future.
  7. Pay off your debt: Try to pay off your debt before you retire.
  8. Schedule regular progress reports: Self-check your money management journey at regular intervals.

We hope it helps you, and if someone is looking for professional assistance, FREED is always available.

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