Today, we will discuss one of the critical aspects once you start earning. i.e., Money Management. Firstly, let us clarify the term Money Management. It refers to handling all your financial aspects, from budgeting to investing to spending & saving. Without some Money Management skills, one has to face some problems in the future. Let us reflect upon some Money Management Tips.
Ways to Manage Your Money
Without Money Management, you will feel the cash crunch no matter how fat your paycheck is. Therefore, the foremost thing for effective money management is well-thought budgeting. Even before budgeting, you need to follow some Money Management Tips.
1. Determine Your Money Priorities
You must establish your priorities before budgeting. It would help to concentrate on balancing your money goals with your habits. That focus is what’s most significant in your life right now. You need to make up your mind about what matters most to you. Is it investing in the stock market? Or is it medical expenses for one of your family members? Then you can cut back some funds from other categories. Maybe it’s a wedding or a vacation you want to save for. Or, perhaps you want to set up an emergency fund, so you don’t have to be worried about if you face a crisis. Whatever issues you mostly have, make that your primary concern.
2. Determine Your Monthly Pay
To create an adequate budget, you need to know how much you earn. This will be a more manageable task if you’re a salaried employee with a standard paycheck. Freelancers or business people may have to estimate their monthly income. Once you have the estimate, add anything you get as a side income.
3. Find Out Where You Spend Your Money
To get the complete picture of your spending habits, you’ll need to do some financial investigation on yourself. If it seems too much, try tracking your one month’s expenses. Take out your credit card statements, housing and electricity bills, bank statements, ATM withdrawals, and online payment records. Open an excel sheet or write them down in a diary. Make a total of your every kind of expense. Then categorize your spending with different labels, like food, entertainment, traveling cost, etc. After you accumulate fees into one spot, total each category to see where the mass of your money goes. You might be surprised at how much you spend eating out. Or, how high of a percentage your traveling costs are than what it should be. This is one of the best Ways To Manage Your Money.
4. Devise a Plan
Now that you have a fair idea of how much you earn & where most of your money goes, you can try to make a plan. The best method should line up with your priorities. Think wisely about which part of the categories of your expenses can be trimmed down. If you overeat, compare the cost with buying groceries. You have to do the cooking yourself, but you will be amazed to find out how much you save. Think carefully about the parts that can be left out of your expenses.
5. Stick to the Plan
Once you have made a plan, give it a try for at least a month. You need to see if it works for you. If you get impatient, you won’t see the advantage of keeping an eye on your finances. Sometimes sticking to that plan is not simple; often, people falter. Just imagine the financial rewards you can have by adhering to the program; more savings means more deposits for an emergency fund. Or more funds for the trip you have been saving for so long. Motivate yourself by visual representation of those rewards.
6. Anticipate Emergencies
No matter how much you have saved for some emergency fund, always be prepared for an emergency in the form of anything. It may come as an illness of you or your family member, some crisis in your professional field. You must remember the problem during the lockdown period due to Covid-19. No one anticipated that; still, we had to bear the pangs of it. At that moment, the best support was our emergency fund. How you put money away for emergencies is up to you. Maybe you funnel all of your side income money to an account you only touch in an utter emergency. Or, it’s where any gift money goes. It could be as easy as a small, monthly auto-deposit. It’s totally up to you.
7. Save Early and Often
This rule is valid regardless of your current priority. The sooner you save, the sooner you can collect interest. You don’t even need an investment account to start gathering interest. Any savings account in a trusted bank will do just fine. Someday you are going to retire & the sooner you start saving for the day is better. Even if you are far from retiring, you must consider the future. Your money grows the most if you start saving as soon as possible.
8. Take Advantage of Freebies
Look around carefully to find what kind of free services/things you can get. Get a quick look at your medical insurance, and find out if the medicines & tests are covered by it. Find out if your company is providing some benefits like health insurance and Mediclaim. If yes, don’t hesitate to grab the offer. You can save more if you find out you can get a full refund of the medical bill if you submit the original bills to your company.
9. Think About The Nature of Your Expenses
If you think carefully about the type of expenses, you might find that some costs are worthless & can be stopped. Like your magazine subscription, because you couldn’t say no to that pushy salesman, the magazines may gather dust because you are not interested. You can discontinue the subscription. It was just an example, but if you think carefully, you will find some expenses that are doing no good to you; in simple words, they are just a waste of money. It is time to stop the wastage of your hard-earned money.
Start asking yourself why is money management skills essential. The clear answer is for a safe & trouble-free future. The life we have is dynamic & unpredictable. A crisis can show its’ face without warning. Suppose we follow some simple Money Management Tips. In that case, we will be able to secure ourselves & our family from hardships in the future.
We hope you like our post about Money Management Tips.