Important Money Management Terms when planning your personal money management strategies:
Income, Spending, Saving, Investing and Preservation.
Sources of cash flow that allow you to support yourself and your family. i.e., salary, dividends, pensions, bonuses.
Your expenses for goods or services like utility bills, rent, mortgage payments, food, entertainment and insurance.
After paying for expenses, you can save your remaining cash for future use. Setting up a savings account or an interest-bearing account like a money market account or CD (certificate of deposit) allows you to track your saved funds accurately while earning a bit of money from interest. If possible, most experts suggest you need savings equal to three to six months of expenses.
Purchasing assets with the hope of generating a reasonable rate of return. Keep in mind that investments come with risks. Still, by educating yourself or consulting with an investment professional, you can earn more money than you originally invested. i.e., mutual funds, stocks, bonds, commodities and real estate are all investments.
Once you have that savings built up, you should focus on preservation and growth. At this point, you should explore financial planning, health and life insurance and potentially a trust relationship. A trust can help you control your wealth, protect your legacy and avoid probate, which can be costly in fees and taxes.
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