Sunday, July 4, 2010

Don't over commit your money.

A lot of people might be thinking of how much money they could make in the future and have started to over commit their money. With this in mind, they will start to buy big ticket items like a big house, luxury car, going for expensive tour paid by instalment. However if the future earning turns out not to their expectation, they will be burdened by their debts and will feel miserable for a very long time.

To avoid this problem, proper money management must be in place. One must know not see their future earning as a gauge to fund their current monetary commitment. In fact using current earning might not be good gauge also as one might just lost job on the next day. The best way is to know yourself how much money you can earn at a minimum based on your current ability if you happen to lose your job tomorrow. Next thing is to minus away 20% of the money for your savings. This savings will help you in case you are jobless. The remaining 80% of the money will be used for your expenses.

So for example, if you think that you can only earn $3000 per month, then $600 will be your savings and $2400 will be your maximum expense per month.

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