Digitalks #23: A Guide to Money Management Solutions
Financial wellness for young workers? In this economy?
Digitalks is a virtual brown bag meeting by Breadnbeyond’s Digital Marketing team where all valuable information, feedback, ideas, seminars, and training sessions are shared.
Payday feels like a celebration, but the days that follow are the real jungle.
With all the bills and expenses, your hard-earned money may disappear in just a matter of days.
In our Digital 23 session, we finally discuss this topic to help you achieve financial well-being through effective money management.
Our seasoned animators, Sunaryo and Huda, shared their practical insights on money management solutions.
Now, let’s dive into the do’s and don’ts of mastering the money game they’ve expertly outlined.
Why We Must Manage Money and Spending
Let’s start with the importance of money management. Here are four main reasons why it matters.
- To avoid running out of money too quickly.
- To increase awareness of where your money is being directed.
- To prepare for long-term savings and achieve respective financial goals.
- To learn discipline and be wiser in spending, especially on secondary and tertiary needs.
When you master the art of money management, you can achieve long-term benefits with wiser spending and savings.
How to Manage Money Wisely
To help you manage money wisely, two charts can serve as a reference for your financial planning.
Remember the importance of sticking to the allocated budget to ensure all your needs are fulfilled until the end of the month.
At this point, the following question is:
What if your spending exceeds the budget allocation?
Prioritize Expenses Based on “Urgent-Important” Methods
If your spending exceeds the allocated budget, you can re-prioritize your living cost management based on Urgent-Important or The Eisenhower Decision Matrix.
- Important — Urgent: These are urgent, essential needs that require immediate attention. This can include bills, monthly groceries, medical emergencies, or necessary repairs.
- Important — Not Urgent: These are important but less urgent needs. They may not demand immediate attention but contribute to your overall well-being or long-term plans. This category could include savings for future goals or investments.
- Not-important — Urgent: Less important but urgent needs are things that need immediate attention but may not significantly impact your long-term well-being. These could be unplanned expenses that need quick resolution but don’t contribute much to your overall goals.
- Not-Important — Not Urgent: This category covers less important and less urgent needs. These are expenses that, if possible, can be deferred or minimized without affecting your immediate well-being or long-term plans.
By using the matrix, you can navigate your spending priorities and ensure that your financial decisions align with your most pressing needs and long-term goals.
How to Allocate for Savings
There are two types of savings, traditional savings and investments, which, in general, differ in terms of risk, return, and purpose.
Traditional Savings
- Generally considered low risk with low returns. Money is deposited in savings accounts, and the interest earned is relatively stable but often lower than potential inflation rates.
- Primarily used for short-term goals and emergency funds.
- May struggle to outpace inflation, potentially leading to a decrease in purchasing power over time.
Investments
- Involve a higher level of risk but may result in higher returns, such as stocks, bonds, real estate, or mutual funds.
- Suited for long-term goals such as retirement, education, or wealth accumulation. Investments aim to grow wealth over time.
- Prepared towards long-term goals, often requiring a longer time to fight market fluctuations and outperform inflation.
Choosing between traditional savings and investments often depends on individual financial goals, risk tolerance, and the intended time frame.
It also matters to consider monthly needs and spending to ensure that the amount of money allocated for savings is in the right proportion.
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