Financial Education: Money Management Tips for Financial Freedom

By MicaR | Online Venture | 8 May 2024

Having money makes your life easy. With money, you can not only buy essentials and pay easily for your needs (including medical bills), you can even buy happiness and pleasure. Let's say you feel tired, you feel bored, you can go on a vacation, hire a personal caregiver who can give you a pedicure, manicure, massage, etc. service. Imagine how relaxing and pleasure it would be to get a hot oil massage when you feel tired and lethargic. If you have money, you can even help your relatives. You can help your parents with finances, you can help your siblings and their family. Doesn't it feel good to help your own flesh and blood? You walk down the road and see a homeless man, if you have money, you can buy him food, even buy a pair of nice trousers. The sense of satisfaction and pleasure you get by helping poor people is immense. Having money means you can also earn more money. You can invest in the stock market, and real estate, create your own business and build a fortune. Even when you are working as a freelancer, you can pay money to build skills so that you can earn better.

But sadly a lot of people do not have financial education. They don't know how to manage their money.

Financial Education is Important

Financial education is very important, however, our educational system does not include this topic in the curriculum. We sure do have "Finance subject" in college and university, however, this course is available for only those who are trying to pursue education in management niches like accountancy, business studies, and business administration. For other people who are studying science, human sciences like arts, literature, sociology, etc. "Finance Subject" is not available. Even for management students, the "Finance Subject" does not include personal finance, it mainly focuses on business-related finances. Our education excludes financial literacy from its curriculum. We are not taught in schools and colleges about how to save money, how to build wealth, how to manage money, how to grow net worth, how to cut expenses, and the things like that. This is one of the reasons why a lot of people are very unsuccessful when it comes to personal finance. Since people do not have knowledge and skills in managing personal finance, a lot of people end up living a very difficult life despite earning well. Therefore, I believe our education should include this topic so that people are able to handle their finances properly and improve their lifestyles.

Learning Money Management Skills

Unless we are studying commerce and management subjects like business management, business studies, finance, accounts, etc. ou schools, college and university exclude the topic of finance in their courses. For example, if you are a student of science, you don't have to study finance, if you are a student of human sciences, you do not have to study finance, however, no matter what career you pursue you always need financial literacy to manage your personal life. Someone in the medical profession does not study finance in college and university, yet he still has to manage his finances and he needs the knowledge to manage his finances, sadly, he does not have the proper financial literacy, despite earning well, he might have scarcity of money in his life because he might be lacking money management skills. It does not matter how much you are earning, what actually matters is whether you are saving or not, whether you are investing or not, if you don't save, if you don't invest, you will not be able to grow your wealth. Therefore, the first step in building your wealth, and securing your future is to start saving and investing your money. Sadly, not many people are interested in saving.

How Learning About Budgeting Helps

A budget is a statement of your estimation regarding your income and your expenses. Your budget will estimate your expected income and estimated expenses. For example, your budget will make a list of your estimated income, for example, x amount from your salary, y amount from your share dividends, z amount from your crypto trading, etc. Likewise, your budget will also make a list of your expenses, for instance spending an amount for your rent, b amount for your gas bills, c amount for your credit card bills, d amount for grocery shopping, etc. Sadly, not many people have these skills. They cannot create their own budget, that's why they fail to save and fail to invest.

Three Different Types of Income

No matter what you do and how you make money, your earnings can be distinguished into three major types.

Earned income: This is the money you make from your work. When you a receive salary or payment for your work, it is your earned income

Capital gain: This is the income you make by selling your assets. When you make profits by selling stocks, property, etc. it is capital gains.

Passive income: This is the income you generate passively, without working. If you receive rents on your property, if you receive dividends on your stocks, that is passive income.

Earned income is basically dependent on your ability to work and your knowledge and expertise, whereas capital gains and passive income are made through your investment or trading activities. You need to manage your earned income to build capital gains and passive income. That’s how you build your fortune. Don’t entirely depend on earned income.

How to Find Your Niche

In order to make money, you need to find your niche. Finding a niche means you find a job or a career option that works best for you. Finding a niche means you find an industry where you can make the most. In order to find your niche, you will have to consider a couple of options, for example

What kind of education you have had?

What kind of knowledge and expertise do you have?

What kind of skills do you possess?

What you are very good at?

What are you passionate about?

If you can answer the aforementioned questions, you can easily find your niche. If you went to a design school, designing is possibly your niche, if you are good at programming, developing and designing websites/apps might be your niche.

While choosing your niche, you will also have to see if the answers to the aforementioned questions connect to each other or not. For example, you might have studied science but you might not be interested in any science-related work, therefore, apart from your education, you might also have to consider your interest.

Let’s say you have multiple skills and multiple interests. How do you choose your niche? Well, try to use everything you know and are good at and stay with the one where your success rate is high.

How to Ensure a Better Financial Future

Two years of the Covid pandemic and now the war, a global recession has begun. No matter where you live, by this time you might have already noticed that the value of your local currency had depreciated in comparison to the United States dollars. In a desperate hope to control the high inflation, the central bank in your country has increased the lending interest rates. When the banks increase the interest rate, this does not auger well for the economy because the stock market will go down whereas the price of commodities will increase.

In the last few months, you might have seen how the economic activities in your country are not very good. So, what should you do now in order to ensure a better financial future?

Do not save money in the banks: There is inflation, when there is inflation your money is losing value every single minute.

Start investing: The recession causes the price of stocks to fall. This is your time to invest. When you are investing, you are also taking control of your financial future.

Work more: A recession will cause you to lose your income stream or reduce your income, therefore, work more.

Spend less: A recession is a time to go into hibernation, therefore, spend less. Instead of spending money on useless things, start investing.

How to Build Your Net Worth Through Insurance

For a lot of people saving money is very difficult because their earned income is hardly enough to pay their bills. One piece of advice they get all the time is to cut their expenses. However, they can't do that because they are only spending on their necessities. If you find yourself in these shoes, my best advice is to buy a life insurance policy. By paying premiums regularly, apart from the coverage against loss and damages, you will also be able to build good savings at the end of the maturity period.

Three Ways to Generate Passive Income to Build Your Finances

Business: If you build a profitable business, you can easily build passive income. You will have to work hard to build a business, but once your business starts generating revenue, you don’t have to work every day.

Investment: Business requires a lot of hard work to become successful, however, a better option is an investment. You can invest in profitable businesses and companies through the stock market and earn passive income.

Product: If you can build a profitable product, you can earn passive income. JK Rowling became one of the richest people in the UK, thanks to her Harry Potter.

Do You Become Rich Through a College Degree?

Do you really have to go to college to become rich? Let me put this another way around, do you have to spend $100k in college education to make $100k a year?

The primary purpose of going to college and university is to learn. Learning is important because you build your income source only when you have learned something.

About 20 years ago, college and universities were the only places where you could learn. However, these days you don’t have to go to college to learn, you can learn pretty much everything on youtube for free. If you are worried about the quality of content on youtube (because it is a user-generated content site where the quality of information is not guaranteed), you could try online learning platforms, there are free online learning platforms as well as paid learning platforms. Even the paid learning platforms charge you a fraction of the money that you would be investing when you go to a college.

I spent about $10,000 in college fees to learn to program, if I had tried Udemy, I could have learned everything for under $100.

Colleges are not the only places where you can learn. In the world we live today, there is absolutely not necessary to spend huge money on a college education. Student debt is a huge issue around the world.

How to Improve Your Personal Finance With Skill Development

In order to develop your personal finance, you need different kinds of skills. Some skills are needed to make you more money, whereas some skills are needed to manage the money you earned.

Income generation skills to improve your personal finance

You can improve your personal finance when you have more money. You will have more money when you have the proper skills to make more money. Therefore, you should never be shy to learn new skills and leverage your earnings. Do some research and find out what skills are in demand, and see if you have these skills. If you don’t have these skills, go to Udemy and spend $50-$100 to learn these skills. If you don’t have the money to spare, go to Alison it is completely free.

Importance of Education in Building Your Personal Finance

Education is not about the amount of information that is put inside your brain. Information is available at your fingertips, you don’t have to go to school for 12 years and then spend 4 more years to become a graduate, you can easily find information through a simple Google search. Education means building your knowledge, skills, and expertise, so that you are capable of doing something, and can contribute to your own wellbeing as well as contribute to society.

Education must be related to your personality and character making and life-building accumulation of ideas. That’s how education will help you gain something. If you are educated, you are not only equipped with skills and expertise to help you earn money but also give you the knowledge to manage your money. Money management is a great skill that will help you build your personal finance.

When you are educated, you can make proper use of your money in buying assets and spending on liabilities. Education helps you distinguish between your necessities and wants. The basis of building your personal finance is the ability to segregate necessities and wants. Once you can distinguish this, you will also know when you should save and when you should invest, or how to save and how to invest.

Two Ways to Improve Your Finances

If you set a realistic goal, it will be easier to reach your financial goal. For example, if your financial goal is to make $100K per month you might not reach there but if you make it $10K per month, you might easily reach your target. Your financial goal should be entirely determined by what you do. If you are a cook in a restaurant, making $20K per month is almost impossible, however, if you are a doctor you might easily make $20k or even more per month. Your goal should reflect your vocation. You also need to cut your spending to reach your financial goal.

In your prime age, you need to work a lot, even if that means working 12 hours a day. You need to make the most of your young age by working. When you work more, you will gain experience, and skills and also earn money. When you have money, you can start building your saving, buying assets, and building your investment portfolios. You also need to build better skills and knowledge in the high-paying niche. If you are a general factory worker, you can try building your marketing skills to work as a marketer and earn better pay from your company.

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