It was a mentor who said that “what you earn doesn’t make you rich. Rather, it is what you do with what you earn that makes you rich.”
And that’s absolutely right.
There was a time in my life when I made a lot of money but couldn’t figure out what I did with it.
No investments, no passive income, inconsistent cash flow, etc.
And that’s when I knew something had to be done.
In the last five years, I’ve learned some key management skills the hard way, and that’s what I want to share in this article.
Hopefully, you’ll learn to apply some of them in your finances too.
Spend on the Most Important Things First
The first money management skill I’ve learned is to prioritize your expenses.
Everyone and everything is jostling for your money.
If you give everyone and everything the access to your money, you’ll be left with nothing.
So, what I do is prioritize.
Have a short list of the most important expenses you make on a monthly basis and stick with it.
After spending on those priorities, then you can do whatever you like with the rest of the money.
What I do is pay myself 10% first, then put money aside for food, my learning, utilities, and my personal grooming.
Then the rest can go towards other extra stuff.
Invest What You can Forget
The second money management skill I’ve learned is to invest comfortably.
In other words, don’t go hungry investing. You shouldn’t invest money when you are lacking in many other areas.
I recently wrote about how I got caught in the web of over-investing.
I used to invest more than what I could forget, and that led to me constantly liquidating my investments to pay expenses.
Look, I’m not super rich. Heck, I don’t even consider myself rich.
I can’t afford to invest a big chunk of my earnings if I want to sleep with my eyes closed.
I used to take the advice of a richer friend to invest over 40% of my income, but that has backfired so far.
Now, I invest what I can afford to forget, and that has kept my investment balanced.
Diversify your Savings
The third money management skill I’ve learned is to keep your savings distributed.
See, we live in uncertain times; even uncertain terrains.
Anything could go wrong, and you could lose your savings.
You might experience a bank account hack, a Fintech crash, a fraudulent broker, debit card phishing, etc.
Hence, leaving your money in one block is just too risky in today’s fincrime world.
So, “cast your bread upon the waters, and you shall find it after many days.”
What I do is hold my savings in interest-paying distributed channels such as a domiciliary account, Fintechs, crypto, and my personal bank account.
Cut Out Expenses that don’t Bring Returns
The fourth money management skill I’ve learned is to be brutal with non-performing expenses.
Ever since I realized this, I’ve stopped funding nonsense.
I’ve reduced my fast food intake, banished alcohol and soda, reduced money gifts, stopped taking unnecessary financial risks, and focused more on beneficial entertainment.
If I don’t see a short-term or long-term return on an expense, then I’d likely not spend money on it.
Find a Monthly Budget and Stick to it
This is one of the most impactful money management skills I’ve employed in the last few years.
I’ve discovered that when I have a monthly budget, I tend to spend closely around it.
Currently, my monthly budget is about 65% of my earnings, and most times, I struggle to spend more than that.
It’s just like I put a tight lid on my expenses.
Barring any unforeseen emergencies, I find that my total monthly expenses always fall just within the confines of my set budget.
If you have a monthly budget and find it hard to stick with, then you should probably cut down your expenses or adjust your budget.