Money never stays put. A simple glance at the world’s financial markets shows money always in motion. This is true of large economies, but it’s also true of individual bank accounts.
If you have any money at all, it doesn’t stand still. There are several ways this happens. If you want to get in control of your money, and your future wealth, it’s important to appreciate the way money moves and evolves. Without this knowledge, it’s hard to understand how your wealth will change over time.
Money Gets Stolen
Fraud is becoming ever more common in the personal finance space. Even if you haven’t had your own money stolen through fraud, you almost certainly know someone who has.
Between credit card schemes, data breaches, and the ongoing PPI scandal, it’s easy to lose money simply because someone else found a clever way to steal it. To keep this from happening to you, it’s important to: use credit cards (much easier to recover money stolen through fraud than with debit cards), contact Canary Claims – PPI claims company (if you have been victim of the PPI scandal), and never to put delicate personal information in places where it could easily be stolen (like in your primary email).
Money Loses Value on its Own
Money is just a physical placeholder of value, whether you’re talking about a physical dollar or a virtual dollar. The amount of value that a dollar can be exchanged for changes over time. Most of the time, money loses value due to inflation.
The best way to combat the natural loss of money’s value is invest it – to earn money at a faster rate than the value it loses due to inflation and other factors. There are a million ways to invest – stocks, bonds, real estate, futures, etc.
The thing not to do is to just put cash in a savings account or hide it under your mattress. If you do that, your wealth will be steadily slipping away.
Money Gets Wasted
If you manage to keep the previous two problems from happening to your money, all that’s left to manage is your own spending and saving habits. Lots of people never really get the bang of a budget. We spend impulsively, we neglect savings, and we don’t prepare for the future through investment.
No matter how much money you make, it’s possible to shoot yourself in the foot with excessive spending and debt. Without managing your spending and living beneath your means, it’s impossible to have an accurate sense of where your money is going and, often, how much you even have. Keep an eye on the money ingoing and outgoing from your accounts each day, and your money will stop slipping away.
Money isn’t static. As a placeholder for value, pieces of currency have the appearance of being set in stone. In reality, their value changes over time. The only way to preserve and grow wealth is to keep it from slipping away in the areas mentioned above.
Budgeting has been one of the greatest strategies I have applied to monitor my expenses and not to lose money without noticing. To make it more effective, I stick to it and make sure that I have well-established categories and scheme.