Managing Money and Debts
Debt! Debt! Debt! This word is becoming one level as with seeing ghosts. Scared! Panic! What should we do? Where do we go? And all panic questions arise. Calm down, be realistic and be wise. Debt will not be seen in the same way as ghosts, once we understand its existence and its connection to our life.
Every action connected to money has an opportunity to lead us into debt. Again, we need to be careful in spending or investing our money. Money-saving-invest-loan-debt-rich-bankrupt, how do we see this line? It is all going around in circle. All of these words are connected to money. Let us start with what we consider the ideal things to have in our life.
Items related with money:
- Living Cost : meals, housing, clothing, monthly needs, electricity, water
- Other cost : household, gasoline, education, vehicle, entertainment, house mortgage, maid, baby sitter
- Support services : insurance, cable, internet, events
- Business related : capital, supplies, equipment, operational costs, employees, etc.
The items mentioned above are examples of our basic needs that relate us to money. Some items, we can eliminate to prevent us from money dissipation, nevertheless the ones we decide not to live without, cannot be fulfilled for free. If we force ourselves to reduce those basic needs in order to save money or to avoid debt, we might be putting either our physical or psychological health at risk.
Different people have different needs. There are some items that are “want”-ed by some people, but “need”-ed by others. The phrase “the grass is always greener on the other side of the fence” needs to be forbidden from being applied in our money management; considering other people’s grass to be greener than our own will take us to money dissipation. Value what we have and be realistic in planning every item we need to spend money on.
The following guideline should help general people in dealing with money issues. It is a simple tip that everybody can apply to manage their money in a very basic form. Our total income is counted as 100%. For the purpose of this exercise, our money spending areas are divided into three parts, with debt as a way payment besides cash.
3-way money management:
- Investing 30%;
- Saving 30%, and;
- Living cost 30%
The logic of this exercise is for every debt you incur, you have to justify the cause for the money spent, whether it is for investing, saving or living cost. Take a note of every single dime you spend to help you improve your money spending pattern. Try to make a habit of spending your money in investing and saving activities first, leaving the living cost to follow after.
Hopefully with this understanding about money and its existence, we will start spending our money more carefully and realistically because money is always attached to our life. Take one learning step at a time in managing our money, and soon, we can be relieved from our debts.
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