The Art of Financial Sense - Knowing Your Limits

When it comes to financial security, we've all "been there". Managing your income sources along with your expenditures is a task that really takes time to master. Coming into a large sum of money might quickly turn into a nightmare without the proper knowledge and financial engines to back you.

The most basic aspects of financial sense are also the most well known: we all know how to cut corners and save small amounts of money here and there. The truth about financial sense is that it has a lot more to do with what you spend your money on than exactly how much you spend. In the following article I will cover not only various ways to increase your monthly savings, but also effective methods towards residual income and ideas as to how exactly your money should be spent.

Turning Savings into Residual Profit

A young child might choose to save some of their lunch money every day to make a purchase. Although this does show a basic financial sense and understanding, the way in which the child chooses to spend their money will rarely provide them with any sort of return on their investment. The most important aspect of financial sense and security is knowing how you can turn any capital sum you have into a positive outlet for additional income. By creating a solid plan for your capital money, the chances of overspending or other forms of wasting will be much lower.

• Stocks and Bonds: The stock market and government or corporate bonds are among the most common forms of investment. If you do not feel comfortable placing your money in the stock market, purchasing a bond is often times a much safer alternative. Bonds purchased in America will generally warrant an interest check sent out twice a year, along with a guaranteed return on your initial principal or investment by a pre-determined "maturity date".
• Savings accounts: A savings account acts as any standard bank account would, with the addition of a fixed yearly or monthly interest rate. There are various forms of savings accounts that come with different limitations or guidelines. Regular savings accounts and money market savings accounts are among the most commonly used and most flexible options, but there are also certificate of deposit (CD) accounts, as well as goal accounts for individuals with larger amounts of liquid money who are more interested in long-term benefits.
• Mutual Funds: A mutual fund takes your money and the money of various other investors and pools it all together to be put towards investments. Any mutual fund will likely encompass stocks, bonds and other various types of investments that will be all be under the control of your specific fund manager. When considering investment into any sort of mutual fund, first be sure to check the previous results of potential fund managers to ensure that your money will be properly distributed for a maximum return on investment.

It is a wise decision to review and research various investment opportunities that are available to you and within your price range before investing. For security reasons, invest a larger portion of your capital into no-risk investments to ensure a profit, while allocating a certain percentage of your additional revenue towards any high to medium-risk investments that you feel might generate a large income.

Saving Your Income

We all have our fair share of unnecessary purchases. Some people buy items such as cigarettes on a daily basis, others waste huge amounts of money on their dietary needs by eating out at fancy restaurants. The specifics certainly change greatly from person to person, but the facts still remain. By occasionally denying ourselves of this financial freedom and setting the money that would be spent into some sort of investment or savings account, your savings will eventually accumulate into a substantial amount of investment or capital money.

A.C.O.D. Quick Tips For Increased Savings

1. Tie your excess money up as soon as possible. Making any capital money unavailable to you is often a great choice if you have any difficulties with saving - if the money isn't there to spend, you simply cannot waste it.
2. If you don't already know very much about any sort of capital investment options or financial measures that help to ensure a positive return on investment - learn. Ask your relatives or friends, go online and read everything you can, whatever you can do to give yourself a better idea of what you plan to do with your capital money. Taking any action without enough knowledge can really be detrimental to your current financial state - make sure you feel confident in your choices and the risks (if any) surrounding them before you make a final decision.
3. Never push your investment money beyond your spending limit - dipping into your personal money and putting it towards an investment involving virtually ANY risk is never a good idea. Even if your almost positive that this investment opportunity might prove extremely beneficial in the future, the circumstances you will be left with in the event of failure are usually never worth it.

Rely on steady income rather than investment prospects. Any form of residual income or investment is generally something that should be handled over a long period of time - make sure that your finances are secure regardless of how your investments turn out.