Basic, Learn, Trading Guide

7 Investment And Financial Management Principles For Young People


Compared with how much money they have on hand, investors should correct their investment and financial management concepts.
For example, if you get 10,000 now, but you do not have the correct financial management concept, 10,000 will still be spent one day. But if you know how to invest and manage your finances, you may be able to save a sum of your own money, or even use this one million to generate another 10,000. Therefore, we should pay attention to “how to manage your money“, and even more should pay attention to “the concept and strategy of managing money“. When you have the correct financial management concept, you can manage your finances smoothly no matter 10,000, 100,000, or 1 million.

So, what are the concepts and strategies of financial management?

Set goals

Goals can be long-term (Eg: retirement funds), or short-term (marriage funds). But whether long-term or short-term, young people must have goals.
When setting goals, note that whether there is an exact time point and amount.

After you have goals, you will have the direction of financial management, and you will know what kind of financial planning you need to achieve your goals.

And goals also need to be revised regularly.
Financial goals should not be the same for ten thousand years, but also need to be revised regularly. Investor should re-examine it on every year to a year and a half, whether you are on the road to setting goals. If yes, great; if not, you need to carefully recall what happened, or whether anything happened in the past that affected the original hypothesis, making the current goal unsuitable for you, and further need to reset the goal.

In terms of finishing, setting financial goals is actually not that easy. It usually takes one to two weeks and must consider it carefully.

Inventory and adjustment of income and expenditure

Once you have your financial goals, the next step is to know your current situations. To understand your financial situation, you need to calculate your income and expenses. You can know what kind of change you can take, only when you know yourself first. In the process of calculation, you may find that your intangible expenses are unnecessary, you can adjust it well and move towards the goal of financial management!

You can change your income and expenses by cutting out unnecessary expenses.
Start with the way you can see the most significant improvement, which will not only give you a sense of accomplishment, but will also give you more confidence in your financial planning.

Focus on cash flow

Rather than spending time to earn or save that kind of one-off small money, young people should focus more on establishing their own money-saving, financial management, and investment strategies. Through this strategy, they can save a certain percentage of their cash flow each month, adjust easily their financial situation, or invest stably (get profit).

Explore suitable investment vehicles

When you are able to control your cash flow and have made sure of it, the next step in financial planning is to start exploring suitable investment tools.

Cash flow and security are like the foundation for building a house. If you start investing without a foundation, you will not only worry about gains and losses in your mentality, which will affect the effectiveness of your investment, but such investment is equivalent to treating investment as a job. Young people must have enough investment ability, in order to have the opportunity to obtain sufficient investment return.

There are many kinds of investment tools, and they also have different risks and characteristics. Even together with one investment tool, there are also different investment strategies and methods. Young people can listen and explore more, understand the principle of each investment tool, the reason behind the profit, the actual operation method, etc., first familiarize with the basic investment rules of each tool, find the favorite investment method, and then formally invest funds.

Reduce the use of credit cards, try not to be in debt

This is mainly a suggestion for “groups who cannot restrain their desire to consume”. According to American statistics, when you have the same income, using mobile payment will pay twice as much as you use cash. If your monthly income is not much, you can try shopping with “cash”, which can save unnecessary “irrational” expenses. And try not to owe card fees as much as possible. This refers to daily consumption. When you start to owe card fees, it means that there is a problem with your financial management concept, because you are not eligible to owe card debt. At least know what money should not be spent. The most important thing is “don’t go into debt“, however, if you need a loan to buy a house, this is not the case.

Give yourself a guarantee

When we understand our financial situation and start to embark on the road of financial management, don’t forget to give ourselves a guarantee. There is no absolutely stable cash flow, so you must give yourself a guarantee of funds. The guarantee can include the following two:

  • Emergency Reserve Fund: Prepare at least 6 months of living expenses, so that you can survive even if you have no income for 6 months. Conservative young people can prepare for more than a year and put them in a high-interest survival digital account.
    Please note that do not put the emergency reserve fund on investment tools such as the stock market and ETF. The emergency reserve fund is the emergency reserve fund, not an investment.
  • Insurance: Choose according to your own needs. When choosing, don’t forget to calculate the ratio of the amount you pay to the coverage you get.
    Some people may wonder that why not just withdraw the invested funds when you need money? However, this may result in a substantial loss of investment profits, and emergency reserves can be prepared to avoid such huge losses.

Don’t complain, adjust your mentality

There are some unexpected expenses in the beginning of your financial planning (eg: investment failure) which broke your planning, then a sum of money that was finally saved was lost again. Along the way, you may complain, feel frustrated, or even want to give up. At this time, young people should work harder to adjust their mentality. No one is born to know how to invest and manage money. Even Warren Buffett, the god of stocks, starts from the most basic terms.

If you don’t understand, you have to learn.

You can achieve your financial goals step by step, only by turning financial management into an attitude and habit.

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