For a long time, there has been a certain misunderstanding among some people about financial management, thinking that only using their own money to buy funds, securities, and stocks is considered financial management. However, the essence of financial management is to effectively manage your cash flow, which has little to do with the amount of money you have. In life, saving money, making budgets, controlling personal expenses, earning more interest, and using credit cards correctly are all financial management activities. In this article, Xiao Qiu introduces ten personal financial tips that can effectively improve personal life.
1. Knowledge is the only way to protect oneself
When it comes to financial management, many people think of finding fund managers or professional consultants from banks or financial companies. This is convenient and saves trouble. You don't have to do anything yourself, just give them the money, and you can make money at home, which is very secure. However, only by truly mastering financial knowledge can you have the best protection. Only when you have financial knowledge can you help you choose the right financial advisor or simply do your own financial planning.
2. Good tools for managing net assets
To manage finances, you need to clearly understand the sources and destinations of your assets. Here are three good tools for managing personal net assets. They are the personal balance sheet, which is a snapshot of personal financial status; the personal income statement, which can help you analyze personal income and expenditure; and financial ratios, which can measure your financial management level.
3. Management of liquid assets
For our personal liquid funds, we should manage them in this way. First, we should have a sense of prevention and understand that accidents can happen at any time. Therefore, we should save 6 months of living expenses in advance for emergencies. In addition, when choosing financial products, we can try to choose some financial products that are easy to exchange. It needs to be reminded that saving is not a spontaneous event, you must plan in advance. Unfortunately, planning is not spontaneous either.
4. The difference between investment and speculationIn life, we sometimes encounter a variety of opportunities, some reliable and some not. You might think you're very lucky and must seize this opportunity to invest well, making more money. However, it's also possible that you're merely speculating. So, what's the difference between investing and speculating, and how should we distinguish between them? First, investing can create value for us, while speculation is more like gambling. Second, generally speaking, the more we invest, the more we benefit, but speculation relies more on market supply and demand. Third, investment typically carries less risk, while speculation carries more risk.
5. Harnessing the Power of Compound Interest, the Key is Time
In fact, financial management activities are like rolling a snowball. But first, you need a strong sense of the future, transforming the assets that pass through your hands from uncatchable snowflakes into an ever-growing snowball. Second, in the long run, the size of the snowball at the beginning is not as important as whether you have one and whether you are willing to plan and manage it. So, everyone should believe in the power of compound interest and start investing early.
6. Credit Card Loans
Nowadays, most people carry a credit card, consuming in advance and then making up for the amount spent later. However, when using a credit card, here are three suggestions: First, use your credit card wisely to avoid excessive consumption. Second, try to repay the full amount on time to avoid affecting your credit limit or paying higher interest rates. Third, some people use credit cards to withdraw cash, but be aware of the specific rules for cash advances on credit cards, such as the fact that banks start calculating interest from the moment you take out the money.
7. High Risk, High Return
Risk and return are matched; the higher the risk, the greater the return. When choosing investment and financial management activities, we need to balance the two according to our own needs. Stocks, which are often discussed, are high-risk, high-return investment products. In the long term, the economy is continuously rising and developing better, so if your investment horizon is long, you can choose this product for higher returns.
8. Diversified Investment
Diversification is a key strategy in investment. By spreading your investments across various assets, you can reduce the overall risk of your portfolio. This approach helps to protect against the possibility of a single investment performing poorly and affecting the entire portfolio. It's important to consider a mix of different types of investments, such as stocks, bonds, and real estate, to achieve a balanced and diversified investment strategy.As the saying goes, don't put all your eggs in one basket; effectively diversifying your investment products can help you reduce investment risks. Mutual funds are one of the best choices for beginners.
9. Life Insurance
Purchasing life insurance does not bring direct benefits to the insured, but it can protect those who depend on the insured, such as buying insurance for the family's breadwinner - the father. This way, if the father encounters any accidents, life insurance provides a certain level of protection for the family.
10. Health Insurance
Buying health insurance is to avoid the huge financial impact that serious illnesses can bring to your financial situation. When purchasing insurance, never skimp on coverage to save money, ensuring that the coverage is below your actual needs. Additionally, it is advisable to choose a comprehensive health insurance plan.
These are 10 tips for personal finance. You can also save money by setting up special mechanisms for yourself, use relatively safe investment strategies like fixed investment, create passive income such as book royalties, and during the growth phase, spend money where it is due, such as buying books and tools. It is also important to enjoy life appropriately and consciously cultivate high-quality living habits.
