2.0 Smart Money Management
Why Does Money Management Matter?
As a student or young adult, learning how to manage your money early can set the tone for your financial future. Whether you're living on a tight allowance or receiving your first paycheck, the decisions you make today about spending, saving, and budgeting, can help you avoid debt, achieve your goals, and build financial confidence.
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2.1 Setting Financial Goals
Managing your money wisely starts with planning before you spend. This means knowing how much you earn, identifying your fixed and variable expenses, and prioritising needs over wants. Following a budget helps you stay in control, reduce impulse spending, and avoid unnecessary debt. To make your financial efforts more meaningful, set clear short, medium, and long-term goals. With a focused plan and consistent action, your money works toward goals that bring long-term value.
Keeping a close personal watch on your financial affairs means you monitor how much you earn, save, spend and invest. This could be through a budgeting app, spreadsheet, or writing it down. The more aware you are of your financial situation, the better decisions you can make.
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2.2 How Much Should You Save?
There are many rules on managing your income, some are as follows:
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The 50/30/20 Budget Rule
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50% goes to needs, 30% goes to wants, and 20% goes to savings.
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The 70/20/10 Money Rule
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70% for needs, 20% for savings and debt, and 10% for wants.
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The common feature in both rules is 20% of your income must go into your savings for rainy days.
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Start by setting aside even a small percentage of your income (e.g. 10%) and treating it as a “non-negotiable” bill.
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It’s not about how much you earn, but how much you keep.
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2.3 Making Wise Decisions with Extra Money
If you receive a sudden windfall, a wise move would be to invest it in a legitimate investment scheme. While it might be tempting to spend on expensive gadgets or temporary satisfaction, it is important to make smart and informed decisions to support long-term goals.
Investing helps your money grow. Don’t just spend, grow your money.
A person who manages money well usually checks affordability first, avoids impulse buys, and focuses on essential needs before luxuries. They don’t just spend based on emotion or peer pressure. Practicing this consistently builds long-term stability.
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2.4 Recording Spending Habits
Recording what you spend helps you identify where your money goes and where you might be overspending it. Those who adopt this habit often find it easier to save.
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2.5 What Does Being Financially Secure Mean?
A financially secure person:
• Saves before they spend
• Prepares a realistic budget
• Has extra money at the end of the month