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How To Manage Idle Funds Effectively?

Updated time: Oct 04, 2021, 09:11 (UTC+03:00)

Managing idle funds or personal financial management is always one of the most important issues that anyone needs to be aware of in order to make sound financial decisions in the future. However, not everyone knows how to properly set up their own idle funds management plans. Personal financial management is a very complex subject. There are no absolute management principles or principles that are entirely true.

Therefore, the concept of managing idle funds here can be understood as simple as managing money, arranging to spend, saving plans, retirement plans in a reasonable way. The ultimate goal of this is to make money profitable on its own. In particular, you are the subject who acts as the highest-level manager, has the right to run and decide all the tasks. In this article, DNBC Financial Group will introduce you to some methods to manage idle funds effectively.

How To Manage Idle Funds Effectively?

Definitions of financial management

First, we must define personal financial management.

  • Management: This is a job in which the boss directs and organizes the work of others in order to maximize work efficiency.
  • Personal finance is the total assets of an individual or a household (including the sum of budgets, insurance, and savings books).

Every successful person verifies that every coin is a seed that always offers value. Each of those seeds has the potential to grow into a massive tree. As a result, if you throw away a seed, the tree will never be able to grow. They place a high value on every change they implement and that is how you should manage your money.

Why can't you save idle funds for the long term?

The answer is that you rarely set a precise goal for saving. It is difficult to save funds money thoroughly, regularly, and effectively in the long term without a defined cause, a specific objective. This is also why, despite being taught to save as children, most of us do not continue to do so as adults. Also, each objective requires a different manner of saving money; if you don't start with a specific purpose, you won't be able to place every penny of your savings at the proper value.

Financial management tools:

Over the past decades, people have been changing, great developments in all fields. In particular, financial management tools are gradually updated and changed every day. The process of change is never easy, especially when it comes to habits. The same may be said of personal financial management habits. You may have discovered what expenses to cut after each count, but how can you stay focused and get started?

You need to go through 3 models to form new habits according to the method modeled on stages of behavior change:

  1. Method of 6 Financial Jars.
  2. Japanese Kakeibo Method.
  3. Applying Technology in Financial Management Method.

Method of 6 Financial Jars.

The 6-jar method of finance was introduced by T.Harv Eker in his famous book "The Secret of Millionaire Thinking".According to the 6-jar method, your total income will be divided into 6 jars as follows:

Method of 6 Financial Jars.

  • Jar 1 – Essential Needs ( NECESSITIES - NEC - 55%)

Bottle 1 - NEC accounts for 55% of your total income. For example, your total income is 8000 EUR, you need to set aside 4400 EUR to enter the NEC fund.

The money in this jar will be used to pay for daily necessities such as eating, traveling, shopping, living expenses, entertainment, and so on.

  • Jar 2 – Invest in Yourself (EDUCATION - EDU - 10%)

The Education Fund - EDu, or The Fund that Invests in Itself, is the second jar. This fund represents 10% of your overall revenue. You shall invest the money in this jar in four areas: health, knowledge, relationships, and self-image.

It is one of the most significant funds since it is the wisest and most lucrative investment because it is invested directly in itself. By measuring, You can raise the Edu fund's portion of overall revenue to 12.15 %.

  • Jar 3 – Long-Term Savings (LTS- 10%)

Jar 3 represents our long-term savings fund (LTS), which amounts to 10% of our overall revenue. Long-term costs include purchasing a home, purchasing a car, marrying, having ten children, retiring, and so on. This fund will be used to pay for it. In addition to paying for long-term costs, the LTS fund acts as a "savior" in instances of hazards, such as illness, property loss, and so on.

  • Jar 4 – Financial Freedom (FFA – 10%)

Jar 4 is the financial freedom fund, which represents 10% of your total income. Use the money in this fund to contribute company capital, invest or save,... to make money work for you and attain financial independence; the more money you work for, the more freedom you have.

  • Jar 5 – Giving (Give – 5%)

Jar 5, sometimes known as a charity foundation, contributes 5% of our overall revenue. The money in this fund will allow you to help those who are less fortunate in life, such as supporting the poor, assisting poor children in overcoming difficulties, and so on. Or the next best thing is to celebrate birthdays, purchase gifts for family and friends, and so on. "Giving is eternal!" When we give, we do not lose what we give; rather, we receive more. Furthermore, this is a wealth-creation process in each individual's soul.

  • Jar 6 – Enjoyment (Play – 10%)

Jar 6 is the Enjoyment Fund, which represents 10% of your entire revenue. Spend the money in this fund on enjoying life, doing what you enjoy, and doing what you always do to unwind after a long day at work. If you don't use all of the money in this fund, that's fine; you may put it in the Financial Freedom Fund or invest it yourself.

Japanese Kakeibo Method

The Kakeibo method is a financial management method originating in Japan." The mother of this method was journalist Hani Motoko (1873-1957), who invented it in 1904.

Over the past 117 years, the Kakeibo method has helped a lot of people make the right decisions and become the bedside tip for anyone who wants to manage their personal finances effectively. The Kakeibo method usually comes in the form of a compact Handbook, which will directly impact our savings-spending process through three parts: Impact Section, Control Section, and Assessment section.

Impact Section

This part, the Kakeibo Handbook, will assist us in planning our savings and expenditures, which are typically specified at the beginning of the month. Take each of the following steps:

  • Step 1: Determine your monthly gross income.
  • Step 2: List all the Fixed Expenses that you will have to cover every month. For example, housing, electricity, water, etc.
  • Step 3: Determine how much money you want to save each month. Separately save this money by abandoning the pig tube or putting it in the bank,... Forget about it and resolve not to use it.
  • Step 4: Using the remaining funds, provide as much detail as possible about the expenses and split them into four parts; the ratio of each portion is entirely up to you.

    Food, transportation, clothing, cigarettes, and so on are all necessities.

    – Optional: Phone, coffee money, restaurant money, etc.

    – Knowledge spirit: Purchase books, documents, periodicals, travel, charity, etc.

    – Occurring: Pre-wedding, vegetarian, birthday, conference, repair (auto repair, home repair, furniture repair,...), presents, etc.

  • Step 5: Visualize and plan for the future: retirement, home purchase, car purchase, wedding, etc. This plan will be made with the money you have saved each month.
  • Step 6: Create the commitments you'll make during the month to keep this habit going.

Control Section

The main content of this Section is to clearly re-define what is "Real need" and "Temporary desire" to help us strictly control our spending and savings. To do this part, you answer questions such as:

  • Do you use this item frequently?
  • Can you really afford it?
  • Is there another product that can take its place?
  • Consider how you would feel if you purchased this. Are you happy, playful, or the same as before?
  • Let's go home, can you buy it again tomorrow? If you forget it the next day, you don't really need it.

Assessment Section

Each month, compare the amount you plan to spend with the amount you've spent and calculate the difference to see how much you save. If you have negative money or just spend enough, attempt to figure out if there are any wasted, unreasonable amounts of money that you can adapt to next month.

Assessment Section

Applying Technology in Financial Management Method

Fintech is understood as financial technology, with the latest applications of technology in the banking and finance sector. As part of the trend of Industrial Revolution 4.0 (Industry 4.0), Fintech has been bringing innovations and innovations that change the face of the traditional banking and financial system when switching to digital banking technology.

With super convenient apps, money transfers go all over the world through swift and SEPA money transfers. Conversion or foreign currency trading is no longer a problem for you. The management of cash flow, look at the history of money transfer, manage many different accounts such as personal accounts, business accounts, sales accounts, etc. It is also possible to set financial goals, liquidity easily and conveniently.

Applying Technology in Financial Management Method

DNBC Financial Group with super app DNBCnet delivers a perfectly optimal experience for customers. Managing your finances and cash flow will no longer be an obstacle for you. We are one of the most prestigious and quality fintech companies. We provide you with a secure payment solution, lookup transaction history, own a digital and physical card so that all operations are convenient, the customer care team 24/7. We are proud to be a trusted friend of every customer around the world.

Why should you choose Us?

The Payment Institution License issued by the Central Bank of Lithuania is entirely owned by DNBC Financial Group. The Bank of Lithuania has granted us permission to conduct the Financial Activities specified in our License. With digital payments and remittances, DNBC Financial Group has become the preferred SWIFT transfer option for people and businesses all over Europe and the world. Individual consumers can also use Payment Mastercards to make online payments or withdraw cash from any ATM globally.

Mastercard is a registered trademark, and the circle design is a trademark of Mastercard International Incorporated, meaning that the Card could be used wherever Mastercard is accepted.

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