How to Manage Your Money

“Money, like emotions, is something you must control to keep your life on the right track.” (Natasha Munson) Money management is the process of budgeting, saving, investing, spending or otherwise in overseeing the cash usage of an individual or group. How you manage your money is crucial to building wealth! Managing your money better just requires some information.

Prepare a Budget

• Track your expenses – Keep a diary of what you spend over a period of time. You need to review twelve (12) months expenses in order to smooth out any seasonality. Determine what expenses can be reduced or cut. Set priorities such as savings or paying off debt.

• Establish goals – A budget is a structure to help you achieve you r financial goals. Before you can prepare a budget, you need to know your financial goals. This may be retirement savings, paying off debt or saving for a down payment.

• Categorize your expenses – You need to know your fixed and variable expenses. Fixed expenses are typically rent, mortgage, insurance, property taxes, car payment, and cable/internet. Variable expenses change from month to month. Variable expenses are groceries, gasoline, entertainment, dining out, etc.

• Review monthly – Every month you should record your actual expenses to compare them against your budget. It helps you see ho w you are doing. If you are off every month, you may want to revise your budget. 

Spend carefully

• Think before you spend – Just because you have money in your pocket doesn’t mean you should spend it. There are sales, discounts, and coupons and to get a better price. You do not need everything you see.

• Avoid debt – If you live within your means, there is no reason to borrow. Borrowing for assets will pay off, but never borrow for clothes, entertainment, vacations, etc.

• Credit cards – They should be just a convenient way of paying for things and should be paid off every month. It is a great way to establish credit, but can be an easy way to ruin your credit.

Start Saving

• Making saving a priority – Start with ten (10) percent and add as you receive merit increases and promotions. You should start with your financial goals! Savings provide choices because you do need to borrow for those unexpected/expected expenses.

• Retirement savings– Too many Americans have little or no savings for retirement. Unless you want to work forever, you need to save for retirement. Without savings, you have no choice!

• Financial goals – You should save for a down payment on a home, vacations, education, children, car, or investments. You should have an emergency fund for those unexpected or unplanned expenses. You may have bigger goals of financial independence or starting a business.

Investments 

• Learn the basics – Take the time to learn about investments! Investing is committing money to a business, project, real estate, or stock market with the expectation of making additional income or profit.

• Retirement plans – Contribute to your company retirement plan, there is often an employer match. Even if there is not a match, it is tax deferred!

• Other investments – Buying a home is considered an investment because it generally appreciates in value. Investing in the stock market, Roth IRA, IRA, etc can enhance your retirement savings. There are also rental properties, collectibles, art, classic cars, antiques, etc which may increase in value.

Final thoughts

If you follow these simple tip s or strategies, you will in great financial shape. I have polled my classes over the years and almost all my students say they want to accumulate wealth. I realize no one says they want to be poor. Unfortunately, they may not be willing to do all that is necessary to accumulate wealth. It takes discipline and determination. Other may say that it takes hard work. It is easy to say you should save, but you have to sacrifice something today for something in the future. Managing your money is not easy!

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