From recent studies, it has been identified that many people make dumb mistakes when handling their personal finances or venturing into investments. That’s the main reason why they struggle to get rich. If you are one of them, you need to pay extra attention to this situation. Then you will need to understand what can be done to refrain from making silly mistakes when you are dealing with money and not keeping it simple stupid.
Why do people act dumb with money?
You must have personally come across a person, who has made bad money decisions. Due to such decisions, he must be doing through skyrocketing debt as of now. If you be honest and take a look back into your past, you will also notice that you have made such decisions in your life. You don’t need to get a Bachelor’s Degree in personal finances to deal with it. All you need to know is some basic tips, which you can follow in order to manage your personal finances in an effective manner.
When you deep dive and take a look at personal finances, you will notice that it is one of the easiest subjects available for you will come across. You need to keep one important equation in your mind and work at all times. Below mentioned is that equation:
Your income – Your Expenses >= 0
If you cannot stick to this simple equation and manage your finances, you are committing lots of silly mistakes.
The biggest reason why most of the people fail to adhere to this equation is that they tend to make emotional decisions. When you are making emotional decisions, there is a high possibility to lose track. In such a situation, you will not have a clear understanding of where you are and what type of decisions you need to take in order to achieve your financial goals. External factors, such as businesses, advertisements and media are tempting you to make such emotional decisions as well. That’s because they know how to tempt you and make you spend your hard-earned money.
If you are facing the same issues, you don’t need to worry too much because there are some effective and convenient strategies available for you to follow. KISS is a perfect example of such a strategy.
What is KISS?
The abbreviation KISS refers to Keep It Simple Stupid. It has the ability to make sure that you don’t fall prey to the emotional decisions that you take. When you are influenced by a lot of complex factors, you will tend to make emotional decisions. This can increase your chances of failing. That’s why you need to keep everything simple and stupid while working with personal finances and investments.
When the system is too complex, you will find it as a difficult task to troubleshoot it as well. In other words, you will fail to figure out where exactly you went wrong. But if the things around you are simple, you can easily locate the problem and then develop effective solutions to overcome it. That’s where KISS comes into play.
How to create a personal money plan with KISS?
Now you have a basic understanding of the definition of Keep It Simple Stupid. While keeping that in mind, let’s take a look at a personal money plan, which you can follow while you are working on your personal finances. You will also be able to apply these principles when you are handling investments. It can deliver excellent results to you at the end of the day.
– Keep track of all the financial metrics
As the first thing, you need to take appropriate measures to keep track of all your financial metrics. You can begin this by analyzing your personal capital. Along with that, you can start tracking the finances. There are some free tools on the internet, which you can use to get assistance with it.
While tracking the financial metrics, you need to take a look at all the expenses. When you are using an online tool or a mobile app, you will be able to make your life easy. It can also help you to ensure that you are not missing out anything.
– Create a budget
When you start tracking the expenses, you will need to create a budget. This is one of the most important steps that you must follow when adhering to the basics of keeping it simple stupid. You need to pay more attention to the above-mentioned equation while creating the budget.
– Develop an emergency fund
It is a good habit to develop an emergency fund along with time. In order to do this, you need to think about paying yourself first. This can help you to give more priority towards saving. You can easily develop an emergency fund, which can save your life in the future. You need to ensure that you are allocating a percentage of every paycheck you get to the emergency fund.
– Invest your savings
Investments are quite complicated. Therefore, you need to follow the basics of Keep It Simple Stupid strictly while working with them. This is where you can think about investing in the large index funds, which are offered by the reputed brokerage firms. You can also think about placing the savings to a mutual fund every single month and then contribute with your blinders to the market.
– Create a long term plan
Last but not least, you should create a long term plan. This is where you need to have a basic understanding of when you are going to retire. In addition to that, you need to take a look at the big purchases that you are looking forward to making in the long run as well. Then you can shape the budget accordingly.
When you follow this kind of a personal money plan while taking a look at the basics of KISS, you should always try to stick to it. Then you will be able to end up with impressive returns.