5 things you should understand for better wealth management

What you must know about your money today to double it tomorrow

17:48 02 November 2014

Many people have little knowhow on financial issues, and you cannot fault them entirely. Our education systems offer little in the way of understanding personal finances. Our parents feel ill -equipped to teach us about the important lessons of saving, investing and spending. 

 

Here are some of the most important financial principles you should keep at your fingertips for a smoother and fulfilling life.

 

1.Earn more than you Spend

 

If you are to come out ahead, then you have to earn more than you can spend. There are periods in which you will need short term loans and credit cards, but generally, you must be able to make more money than you spend or you will become bankrupt in due course.

 

2.Save Early to Save More 

 

When you are planning to make an important acquisition, such as a home or a retirement plan, start saving the monies early and in an interest bearing account. Compound interest rules dictate that the longer you invest, the more you accumulate. Alternatively, you can consider the stock markets and invest some money in to it, but be prepared to take risks in the short term. 

 

3.Greater Rewards Translates to Greater Risks

 

If you just want to keep your money for a short term period in a safe spot like in a bank, then you are forgoing great earnings. If you wish for huge returns, then you have to consider investing in risky avenues such as stock market where you can earn more on the long run.

 

4.Diversification Lessens Vulnerability

 

If you invest all your monies in one stock or sector, you are highly vulnerable to incur losses if the stock or sector dips. With a diversified investment portfolio, you can count on one sector if the other fails.

 

5.The Financial Sector is Ever Changing

 

Every passing day, there are new products and new fees to spend money on. Constantly look out for how your account policies are changing and stay abreast of changes in the legal fraternity and how they affect you and your finance.