7 Money Management Tips for Improving Your Finances

Here are seven money management tips that will improve your financial situation.

 

Everyone wants to be financially stable and secure. There are factors affecting this that are beyond our control, but there are others that aren’t. Good money management can help you keep your financial house in order and serve as a bulwark against those factors you can’t control.

 

How To Manage Your Money

 

You don’t need a college education in financing to practice good money management. Smart spending habits and keeping track of expenses and regular obligations like rent, utilities, and car insurance will help you stay on budget and build savings that can become the basis for a reliable and adequate retirement income.

1. Budgeting

Start out by creating a budget that accounts for earnings from your salary and any other sources, rent/mortgage, and fixed and variable monthly expenses such as groceries, utilities, car payments, insurance premiums, internet service, entertainment subscriptions such as Netflix and Amazon Prime, etc.

Does your monthly income cover all of these and leave extra money available? If it doesn’t, you’re looking at living in debt, and you need to look for ways to bring some of these down.

2. Tracking Expenses

As you manage your budget, you also need to keep track of other expenses that don’t fall into the expected categories above. For example, what you pay out of pocket for a snack and drink at a convenience store is something you should track. So are ATM withdrawals with your debit card. If you don’t, these kinds of things can quietly add up and land you in deficit spending territory.

Track all of this in your own files and check it on a regular basis. Make sure your records match what bank statements for your checking account are showing. See if your current spending is keeping in line with that for previous months; this helps promote consistency and stability.

3. Saving and Investing

Start building a savings and/or retirement account. A Roth IRA or investing in mutual funds might make sense. Alternatively, you can seek out savings accounts with the highest interest rates available. On average, they earn less money over time, but they carry far less risk than investing does. Financial advisors can help you make the right decisions for you.

 

If you don’t have a lot left over for savings at the end of the month, look for other ways to get the money for it. For example, avoid the temptation to spend your tax refunds or splurge on your birthday. Instead, put that money into savings or investments.

4. Setting Financial Goals

It’s easier to achieve financial stability and security if you set specific financial goals. For example, what amount of money will you need to retire? Where do you want to be in 10 years? When you establish goals, you can make an action plan for reaching them.

5. Paying Off Debt

Debt from student loans and credit cards can be overwhelming. Pay off the former as soon as you can and look into refinancing or consolidating it if possible. With the latter, don’t fall into meeting just the minimum payments indicated on your credit card statements. A financial advisor can help you make a plan for taking care of these and other debts.

6. Emergency Fund

If possible, set aside an emergency fund to help you cover any unexpected expense that comes up. This will let you manage that expense without having to tap investments or savings. Even better: keep these funds in an account that rewards you with interest paid on them.

7. Living Below Your Means

We’re often told to live within our means. Unfortunately, a lot of people interpret that as buying the biggest house, most expensive car, etc., that they can afford. If you instead focus on practicality and comfort, you’ll have extra funds due to better money management.

 

Free money would be nice, but don’t count on it. The key to reaching financial goals is sound money management. With it, you’ll have a solid handle on your finances, and the prospects of getting where you want to be will be a whole lot brighter.

 

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