Money is used as a medium of exchange, transactions or buying and selling. Everything costs money. For this reason, everyone will definitely try to work hard in order to make money. But which is more important here, between making money or managing finances? For example, there is a worker in the city who has a salary of 7 million every month. The worker has worked for more than five years, but he only has assets in the form of savings of 30 million. Then on the other hand, in the village there is a farmer who earns a maximum monthly income of 5 million. But after five years of working, this farmer already has assets in the form of a house worth 60 million in his village. Let’s compare the assets owned by workers and farmers? Why can an employee who earns more in the city not have more assets than the farmer?
If we discuss financial management, in fact, as time goes by, we can borrow money which can certainly help us to make it easier to manage financial management. In particular, personal finance cannot be separated from lifestyle management. For example, previous workers and farmers, the lifestyle of workers in urban areas is certainly different from the lifestyle of a farmer in the village. Apart from the fact that the cost of living in cities tends to be more expensive, the needs of workers and farmers cannot be equalized. The farmer certainly doesn’t need to buy formal clothes for work, nor does he need complete gadgets such as laptops, smartphones and others. However, this is not the only reason workers have far fewer assets than farmers. With a greater income, workers should be able to optimize their income more. That’s why it is so important for every individual to understand financial management. There are also quite a few cases of someone who has more income but he also has much more consumer debt too.
This principle is very popular with millennials who are starting to work and want to learn to manage their finances. This principle has basic rules for managing finances by dividing income after tax and allocating it for spending by dividing 50% for needs, 30% for wants, and 20% for savings.
By borrowing finances, if we simulate a worker who has a net income of 7 million per month, then every month the worker has savings of 1.4 million. If accumulated over five years of work, he should have savings of more than 30 million. Of course, this must be done consistently and with full commitment. Another example is the 70-10-10-10 Budgeting Method. In simple terms, as follows:
• 70 – Spend 70% of your allocated income to meet daily needs, including entertainment.
• 10 – Keep 10% saved for your future funds
• 10 – Invest 10% allocate again for investment
• 10 – Share 10%, don’t forget to allocate funds for social needs, compensation or assistance for those in need.
In this budgeting method, we can allocate part of our income for investments and retirement funds. When compared to 20 percent of savings, only set aside 10 percent to save and another 10 percent to invest in the hope that it will generate more income in the future. When deciding to invest, we must have further knowledge, lest the funds we invest do not provide profits and even suffer losses.
Apart from that, there is also a method of managing finances that is quite well known and widely used by housewives, which means a ledger or household financial record. Believe that financial management methods can change our view of money and make us more insightful in managing finances.
The steps that need to be considered in implementing financial regulation methods are:
1. Record all the income you receive at the beginning of the month, both from routine income such as monthly salary and additional income.
2. Set aside the finances you want to save for the following month.
3. Allocate the remainder into several expenditure items which are divided into four categories:
- Survival or basic needs such as food costs, bills, installments and other obligations.
- Optional or secondary needs include entertainment, eating out, and so on.
- Culture or the need to increase insight, for example books, films, magazines, etc.
- Extras or other expenses such as gifts, home repairs, motor vehicle maintenance, and so on.
- Prepare several envelopes to store the allocated funds from these expenditure items. You can choose envelopes in different colors, give each envelope a name according to the purpose of spending it.
5. Check which envelopes or postal shave saved you a lot and which ones have spent more than your budget. With this, you can adjust your finances for the next month.
If over time you manage to reduce expenses and save more money, it means you have succeeded in implementing financial management.
In the current era, there are many ways to manage finances that we can guide from successful figures. Maybe in the past we only focused on working and making a lot of money, but didn’t understand how to manage the money we earned. Often we find ourselves running out of money at the end of the month without realizing where we spend the money. That’s why it’s important to manage finances, of course starting from managing our lifestyle. The decision to manage your finances also requires commitment and consistency with yourself. Whatever the method, of course it must be adjusted to your needs and priorities.
