Tip In Managing Your Money

Photo by Judith Haeusler

I often hear people complaining that they're not making enough money, their salary is not enough to cover their expenses or how they wish they are making more money to solve their financial problems. Now this may be true to some extent, but more often than not, most financial problems are caused by people mismanaging their money.

Most people tend to spend more than what they're making, thus putting themselves in a financial hole that they struggle to get out of. Earning more won't solve their financial problems, because what usually happens is that people just spend more when they earn more.

One way to solve this problem is to live within (or even below) one's means. Meaning spend only the money that they earn on needs, and eliminate unnecessary spending.

But living within one's means (or even below it) is very hard to do. Considering the slew of advertisements and promotions that people are bombarded with on a daily basis, urging them to spend and spend and spend.

One Tip I can give that will help people in managing their money is to follow what we The Prosperity Formula.

This is what most people usually do when they receive their income:

INCOME - EXPENSES = SAVINGS

The problem here is that there's usually no money left to go into savings. Most people use up their income paying for the expenses that they end up not having any money left for savings (some even go overboard with their spending).

Now The Prosperity Formula goes like this:

INCOME - TITHE (optional) - SAVINGS = EXPENSES

How do you divide your income in this way? Here's a suggested way of dividing your income:

INCOME - TITHE(10%, this is optional) - SAVINGS(20%) = EXPENSES (70%) you budget your expenses on only 70% of your income.

Before you react violently, here are the reasons why its good to follow this formula:

10% to tithes is basically the money that we give back to God. It's our way of saying thanks for all the blessings that he has given us (tithes are optional though, we don't force people to give to God, its more meaningful if they do it on their own accord).

20% to savings is just saying that you should pay yourself first before you pay for your expenses. You've worked hard for your money, you've earned it, so its natural that you pay yourself first before paying McDonalds, Jollibee, Starbucks, your utility bills, and so on. No one will will do this for you, so its important that you take care of yourself first before you take care of everybody else.

Following this formula will help you monitor your expenses to live within the 70% that 0505you'll be allotting. It will also help you instantly make money, without needing to get a second job to earn extra cash.

It's going to be hard to follow at first, but with constant practice, you'd be able to do this without problems. And once you're able to do this, you'll see an increase on your savings and your wealth (you can check out my article on How To Budget Your Money for additional guide).