Money Problems Solution

As I was browsing my facebook page I noticed my financial mentor posting a status message that is something worth sharing.

He said on his status message that there are two reasons why most of us have problems with our hard earned money.

1. Money Management.
2. Not Enough Income.

There are a lot of people earning lots of bucks in a month. Towards the end of the month they started to worry how they will survive for the remaining days before paycheck. They mismanage their hard earned money. They never budget. They never save.

Okay let us assume that they save. They save in banks. Most of banks give 1% interest rates for their savings and 4% on their time deposit account. Is it enough? Nope. If you place your hard money on these kinds of investments, you’ll lose. Why? Average inflation is around 7% per year. I was not surprised when I heard that the price of petroleum, rice, and sugar increased. Thanks to inflation. A good money management tip I can give is to place hard earned money on at least 8% interest rate. This way your money will earn.

For those who never save. I suggest that you save first then live on the remaining percentage. The ideal saving is around 20% of your income. So let’s say you’re earning 20K a month, after you receive your 20K set aside 4K and live with 16K.

I developed a formula for this. This works for those people who have a budget plan for their expenses. Divide expenses for the month by 0.8 or 80% to get the ideal net income. For example, if a person has an average expense of 20K per month, then he should be earning 25K at least in order to save 20% of his income.

If he earns less than that amount, then we move on to the next money problem. Not enough income.

The only solution for money problem # 2 is to increase your cash flow. Increasing cash flow can be done by (1) reducing expenses and (2) getting more sources of passive income. Passive income is a long topic to discuss. I’ll reserve that topic in the future.

Hope this post can help you manage your finances better.

PS. If you want to know more about handling finances you may contact me through my email. Email me @ elvinperia@yahoo.com

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