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How to Manage Your Money

How to Manage Your Money

October 8, 2014 by Justin

β€œMoney, 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.Β 

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.

InvestmentsΒ 

  • 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!

Photo by: Β Flickr

Filed Under: Goals Tagged With: Budget, Budgeting, financial decisions, Goal setting, Goals, information, interesting, Personal Finance, Planning, Retirement, Savings, Stretching your Money, Values, Wealth

Comments

  1. Money Beagle says

    October 8, 2014 at 9:30 am

    One point I would make is to try not to tackle every one of these items at the same time. Work on one or two at a time, then gradually move onto another once you’ve achieved success. Trying to do everything at once can often be too disruptive and overwhelming, where introducing these things slowly will take longer, but increase the probability of success.

    • Krantcents says

      October 8, 2014 at 5:15 pm

      I agree! Small changes is the best way to success.

  2. Louise @ Good Financial Choices says

    October 9, 2014 at 12:52 am

    I would stress that it’s not easy, and it’s all about what works for you (and your family) at this particular stage in life.

    I’m a firm believer in concious spending – economise where you don’t mind, and spend more on things that really matter to you.

    • Krantcents says

      October 9, 2014 at 7:05 am

      Change is never easy! I always suggest to make small changes first. Setting priorities for your spending as well as savings is key to managing your money.

  3. Michael | The Student Loan Sherpa says

    October 9, 2014 at 4:55 am

    I think the part the many people struggle with is the delayed gratification. If you are 25 now, it is hard to imagine what your life will be like in 10 years… let alone 30 or 40. As a result, instant gratification wins out and wise money management is forgotten.

    • Krantcents says

      October 9, 2014 at 7:09 am

      I agree! That is why you start out small and it does not impact your lifestyle. One way to handle long range goals is to break them down to what you need to do now. I never thought about retirement 30-40 years away, but what I wanted to do in 10 years. Balance is very important or you will feel it is not worth it.

  4. Tawcan says

    October 10, 2014 at 8:19 pm

    Think before spend is a big one. If you ask yourself if you really need the item you’ll end up saving quite a bit of money.

    • Krantcents says

      October 10, 2014 at 9:16 pm

      In addition, do you need it now? Even you determine you need it, you probably buy it on sale or discounted if you wait.

  5. May says

    October 11, 2014 at 6:41 am

    Good point about the employer retirement plans. If you are offered a savings match and don’t take it – you are leaving money on the table. It’s like saying no to a raise…

    • Krantcents says

      October 11, 2014 at 8:31 am

      I once turned down a senior discount because I was insulted. The emphasis is once. I got over it and now ask for it. If I were just starting out, I would contribute to a my 401k up to the match. It is a no brainer!

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