Did you know that the American consumer debt is almost $14 trillion?
Managing your money is an important task to ensure your future. Having debt sometimes can be a good thing, but it’s always better to save as much as you can. But without knowing what to do, you can’t do it efficiently.
Don’t feel hopeless yet.
With this guide, you’ll learn several money managing tips. That way, your money management improves as you get more wealth. Read on and find out more.
1. Think About Your Monetary Priorities
Before you budget your money, you must think about your priorities. This is a crucial step since you’re unlikely to commit to your financial plan otherwise.
So, how do you determine your focus? The easy answer is that it’s the most important thing in your life at the moment. For example, if you have a large credit card debt, you must prioritize paying that off.
Another thing to consider is that your monetary priorities often align with your values. The largest categories are often the reflection of your top priorities. It matters not whether you value bodily care or traveling abroad.
That’s why you must make whatever concerns your biggest priority. This is a good starting point, at least.
2. Look Into Your Monthly Salary
You’ll have no means of managing your money without a definite idea of your monthly earnings. If you have no concrete figure, start by determining your income each month after deducting taxes. This is an easier task if you’re an employee receiving a regular paycheck.
Otherwise, if you’re a freelancer, estimate your average monthly income. After determining this, look for any extras you earn from side hustles. For example, if you maintain a blog with a regular stream of ad revenue, add it to your monthly income.
3. Track Your Money Spending
Now is the best time to audit your financial situation. This will allow you to get a full image of your money spending habits. If it’s too much for you to track each penny you spend, limit it to a single month’s worth instead.
Look at your credit card statements, housing, utility bills, and various payment records, whether they’re bank statements or digital payment methods. Depending on your preference, get a spreadsheet or paper and a pen to add your expenses.
As you parse your money spending, you’ll learn to categorize each item. For example, you’ll identify them as necessities, luxuries, savings, or debts. You can be as detailed as you want, with categories like entertainment, food, transportation, and more.
After you catalog each expense in a single place, add expenses for each category. This allows you to know which consumes the bulk of your money. In some cases, you’ll feel appalled at the amount of money you spend on food.
4. Make a Plan
With a definite idea of your earnings and spending, you now have the information to make a plan. Your best financial plan must complement your priority and spending habits. That way, you’ll avoid becoming one of the families turning to bankruptcy each year.
For example, if you’re into fitness, you’re likely to spend lots of money on gym memberships, yoga classes, and athletic gear. You need not cut it out since these are important to you. But if you want to meet your priorities, you must cut your expenses somewhere.
Sometimes, this means you must shop at discount grocery stores instead. A good method is to set up an auto-deposit to your savings account. That way, when you get your paycheck in the bank, the money gets diverted before you consider it as spending money.
5. Commit to the Plan
After finalizing your plan, commit to it for at least a month. This enables you to determine whether it works in the long run. If you don’t, you won’t have a definite idea whether it benefits your financial situation.
This means finding a budget, starting with it, and staying for as long as you can. A good technique is to surround yourself with your goals’ visual representations. For example, if you want to save for an international trip, keep your goal fresh by posting pictures of your destination.
6. Always Expect Emergencies
One of the most important money management tips is to keep liquid funds close by. It matters not what your priority is since crises might arise. Take note, you need not save six months’ worth of expenses but aim to save for three at least.
If you have money to deal with unforeseen problems, you feel more secure and prepared for anything. It helps a lot to lessen the stress that comes with most emergencies. With a financial cushion, you eliminate an element of concern.
It’s up to your preference on how you put emergency funds away. You can put all your side hustle earnings to an account only accessible in absolute emergencies. This is one example, but it’s ultimately up to you.
7. Save Early and Often
Regardless of your priority, money managing is always better with this rule. The earlier you save, the earlier you get interest. You need not get an investment account to do this since most FDIC-insured savings accounts gain interest.
It means you won’t end up losing money.
This rule especially applies when thinking about retirement. It’s better to put money away in either an IRA or 401(k) earlier in life. Always consider the future, even when you’re decades away from retiring.
Of course, it may also depend on your bank. Take the time needed to learn the benefits of opening a savings account in each bank available in your area. For starters, you can try out opening an account at Farmers Bank.
Get More Money Managing Tips Today
These are some money managing tips you must consider. Take note, these are only the most essential ones around, so don’t hesitate and look for more.
But why stop here when there’s more to discover when it comes to saving money? We encourage you to read our other posts and learn more valuable tips and tricks related to financial management today.