Money management doesn’t come easy. It’s something you must learn and practice. This explains why so many people around the globe are stricken with large amounts of debt. Sometimes it’s hard to decide what you want versus what you need. Today, we are going to give you some of our personal favorite tips so you can begin managing your money and feeling better about your current situation.
Where Do I Start?
The word ‘budget’ and the phrase ‘manage your money’ tend to freak people out. They sound so harsh and drastic. Well, we have good news; they aren’t as intimidating as they sound.
To begin managing your money, you need to first recognize that no matter how much or how little money you have; the importance of understanding money is still the same. Everyone, even those who are rich, need to know how to manage money. Those who do have large amounts of money are typically those who have learned over the years how to properly take care of their finances.
Calculate Your Income and Expenses
While all of us want to do whatever we can to save money, it’s surprising how many people do not know how much money they make versus how much money they need to pay for their expenses. Take a moment to figure out how much you make each month after taxes. From there, you want to add up all of your bills. Don’t forget to add in things that are variable such as clothing items, food, and entertainment. Even just a rough estimate to start will do.
Now, you want to minus your expenses from your monthly income to get an idea of where you stand. Shocked by the numbers? Many people are, but this doesn’t mean you can’t turn things around.
Track Your Spending
Knowing where your money is being spent is extremely important. Too often people spend their money without really keeping track of where it’s going. One must figure out the root of their money problems before they will be able to track them and fix them from the roots. Keeping a spending log is one great way to better determine where your problems lie.
Spend Wisely
A lot of people tend to spend their money on things that they do not actually need. If this sounds like you, then it’s time to make a change. Instead of purchasing something the moment it pops into your head, give yourself some time to think about it. Ask yourself, “Can I live without it?” or “How will this benefit my future?” If you can live without making the purchase and there is no benefit to your future; then it’s best to go without spending the money. Take the money you would have spent and put it into a savings account where you gain interest. You’d be surprised how quickly money can add up over time.
Savings is Only for Emergencies
A lot of individuals will make the mistake of dipping into their savings accounts at the drop of a hat. Just like when making an everyday purchase, really think it over before touching your savings. Your savings is an investment in your future and should be treated as such; pretend it doesn’t exist whenever possible.
Credit Cards Must Be Used Carefully
While it’s easy to become intimidated by credit cards; they actually aren’t all that bad, if used with care. It’s important to only use your credit card if you know you are going to be able to pay it off. Also, keep the amount owed on your card lower than 30% of your total available credit. This way, it’s much easier to pay off and your credit score will not be negatively affected.
Another thing to keep in mind is that you should always at least pay the minimum payment each month. Doing so is going to keep you from having to pay penalties or fees. If you do not like the idea of using a credit card, you can always stick with a debit card; this way you are spending money you have and not getting into a position where you owe anyone money.
Give Yourself Some Wiggle Room
Whenever you go about saving money, it’s important to not over save in the beginning. If you start right off the bat limiting yourself too much; this can make it harder for you to stick with your plan. Give yourself rewards for little accomplishments and don’t forget to enjoy life. You don’t want to save every last penny; you’re allowed to have fun in the present while also saving for your future.
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