Mastering Your Finances: 6 Essential Mindsets to Kickstart Your Investment Journey

preamble

“You don't manage money, money doesn't take care of you,” should be a saying that everyone who is ready to start banking will agree with. Most people tend to think of money as “make big money with small money and want to be rich freely”, equate to investing. However, banking is not just about investing, but what exactly is it? How should I prepare it again? In the following article, we will introduce six banking concepts to help you understand the meaning of finance and find the right financial plan for you.

Concept 1: What is Finance?

“Investment banking” is a word that is often lumped together, but investing does not equate to financial management. Finance is an abbreviation for “managing finances”. So as long as it relates to the use of money, how do you make money anyway? How to spend money? How to deposit money? How to invest? And so on, it all falls within the scope of banking. So even if you invest a lot and master the open source approach, poor financial management can also lead to losses. Finance It is not a momentary action, but should be a continuous practice in your life of how you use money.In other words, “banking” is the attitude towards money in your life!

Concept 2: There must always be a direction in things, and financial goals must also be set

The way of banking varies depending on everyone's circumstances, such as income, real spending, etc., so there is no standard SOP for everyone to do without a brain. But before you start banking, you should be clear about why you are banking. You may be banking for retirement; it may be to buy a house; or you just don't want to look at your boss's face every day so you can retire early. These financial goals can last for decades, perhaps as little as a year or two, or be planned to be achieved in many stages.All in all, you must first set a goal for your financial planning. Try to figure out, “How much is it going to cost?” , “When will it be reached?” , let yourself know the direction of your finances!

Concept 3: Take a look at your expenses first

Now we have goals for banking, but before we start banking, we should take a look at our current spending situation. Once you understand your spending and receipt status, you can make appropriate adjustments and financial planning for existing issues. Since most people's income should be relatively fixed, this article will focus on analysis in terms of spending. When viewing your expenses, in addition to classifying each of your expenses, you should further break these categories down into three major items of expenditure:

1. Necessary Expenses: That is, expenses that people live in the world and cannot afford.

Simply put, it is money to spend even without income, and it is difficult to adjust expenses immediately in a short time. For example: rent, utilities, gas, loans, taxes, etc.

2. Expenses required: Although it is necessary to spend, there are optional expenses that are easier to adjust.

These types of expenses, although of some importance for our lives, still have other options that can meet basic needs. For example, the meal fee, although you can not stop eating, you can choose to eat at a restaurant every day or prepare it yourself at home. Other common expenses such as mobile phone charges, internet charges, etc.

3. Want to spend: Basically, it doesn't cost or affect your living expenses.

Simply put, it's about turning the money into the shape you like, but without spending it or spending it. Such as entertainment fee, shopping fee, etc.

Concept 4: Remember to give yourself some protection first

Accidents always happen, so when planning our finances, we also need to take into account the protection funds in the event of an accident so that we can still have the foundation to continue in life in the event of an accident. This protection fund can generally be divided into two types:

1. Emergency Reserve: Deposit funds that can be used at any time for emergencies.

An emergency reserve fund is a fund that will keep you alive in an emergency, so pay attention to the following points when planning:

• Expenses that must be able to sustain a certain amount of life for a certain period of time:

In general, this money must be able to provide you with no income for at least six months.

THAT IS, YOU HAVE TO PREPARE AT LEAST “(NECESSARY EXPENDITURE+ (EXPENDITURE REQUIRED AFTER PLANNING ADJUSTMENT)) X 6”.

• Must be available at any time:

Being prepared for an accident means that it must maintain a certain flexibility and must be independent of all financial planning, so that you can always use the reserve when you need it without worrying too much.

• You must be able to maintain a sustainable value:

Simply put, deposit an emergency reserve of $100 and withdraw at least $100 when you need it, so you can achieve the purpose you originally set it for; but if you buy stocks with this $100, it is difficult to guarantee that it will be able to support you fully when you need it because of the volatility of the stock market. With a value of $100, the stock is not ideal for use as an emergency reserve.

Finally, after the emergency has passed, return the emergency reserve gold reserve to its original set level as soon as possible and be prepared for the next accident!

2. Insurance: Get an extra layer of financial protection in the event of a special accident.

There are many insurances on the market that can provide some financial support in the event of a different accident. This section allows you to choose the right insurance plan according to your needs. However, this section has to mention a special type of insurance — savings insurance. Simple savings insurance is not like insurance designed for accidents, but rather like a way of saving on a regular basis. Most savings insurance designs have a penalty waiver design, which will result in a loss of funds if the money is needed in the face of an unexpected urgent need for money.In other words, because the funds in savings insurance are less flexible and cannot be used at any time, it is not suitable to count it in the hedge funds here.

Concept 5: Establish the concept of using money

Once you have determined your income status and secured funds, you can start making specific financial planning! But how to start planning? Start by looking at how you spend your money. We can divide the use of money into four main blocks: Income, Expense, Savings, and Investment.For the four big blocks, the interaction can be simplified to this formula: income-saving=spending+investment

1. Subtract savings first:

This is a pretty important concept. Savings can serve as the basis for achieving your financial goals, and when income is relatively fixed, how much money you spend, you will never be able to achieve your desired goals. So you can think of it as “Help yourself get a pay cut now and raise your future salary” and actively control your spending budget so that you don't drag down the progress of your finances.

2. Viewing and Adjusting Expenses

After confirming what money can be spent, we will also make adjustments to the expenses.

• Start from three categories of expenses

Remember the three categories of expenses mentioned earlier?

“Necessary Expenses” may be more difficult to adjust, but in “Expenses Required” we should wonder if there are places where this section can be reduced. For example, drinking coffee every day, buying Starbucks with over a hundred and one cups of Starbucks can also reduce the cost of buying copper-plate coffee at supermarkets.

Then there is the “want to spend” part, before you spend it, you should think about whether the satisfaction it brings is worth the price. For example, a $10000 bag can be exchanged for the cost of a week of work. Can the satisfaction of buying it match this price?

• Changing the way you spend

Many ways of spending, such as mobile payments, credit cards, etc., offer a lot of spending offers or feedback, and you can save another expense if you use these different ways of spending in your consumption.

3. Continuous Adjustments in Practice

You may have heard of proportional banking principles such as 631, 333, or six cans. Sure, they can help you quickly create a pattern at the beginning, but everyone's situation is different and you have to adjust at any time to find the distribution ratio that suits you about each category.All in all, remember the previously mentioned money usage formula and adjust and find the right financial gold ratio in practice!

Concept 6: Investing is not two or three days, don't just want to make big money

There are no profitable investments in the world. Different ways of investing, the risks and characteristics are different. Faced with uncertain risks, beginners often have their hearts racing with market prices when trying to invest.We have to remember that investing is for the sake of banking and banking is our attitude towards money, so we should use these investment tools with caution, establish our own pace and investment mindset so as not to be carried away by market fluctuations.Therefore, when investing, you also need to research and explore various investment tools and build an investment mindset that can make a solid return, rather than putting all your money into it at once, trying to “rush” short lines not to return blood loss. To find the best way to invest, you should do a lot of research and understanding of the principles and how each investment method works.In other articles, we will also introduce some ways to invest so that you can build a foundation for the concept!

epilogue

Money management is your attitude towards money in my life!The relevant concepts presented in this article are mainly to help readers understand the concept of money, make an initial plan, and of course it will require you to continue to practice it in life. In other articles, we will continue to introduce knowledge about finance and investment so that you can quickly build the foundations, find and create your own financial plan, and reach your financial goals early!

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