Good Money Management Skills: Tips and Tricks
Wherever you are in your life – married with children, living alone, or living with your parents – developing good money management skills will be an advantage. The sooner you learn how to become a good money manager, the sooner it will become a matter of habit. It is always better to prevent financial burdens rather than backtrack and fix them later. Here is how you can step on the right, financially conscious path.
Why Are Money Management Skills Important?
First, what are money management skills? Money management refers to how you deal with the financial aspect of your life. It includes everything from budgeting and short-term goals to investing for the future. Money management is not primarily about restricting – it forces you to look at the bigger picture regarding your spending and align your budget with your goals.
Any amount of money may seem too little. Therefore, personal financial management is important because it restructures your funds and opens up possibilities you thought you could not afford.
Developing money management skills is simultaneously a simple and complex task. On the one hand, it only requires following a few new rules. On the other hand, it requires discipline and persistence. In any case, being a smart money manager is worth your time and effort because:
- It makes getting out of debt easier or prevents you from becoming burdened by new debts
- Unexpected expenses will not be devastating
- It improves your credit score
- Mortgage or loan approval rates are more likely to be on your side
- It will be easier to set up savings and routinely contribute to it
- You are more likely to be able to afford a holiday or some other luxuries.
Creating a Successful Budget
Surprisingly, making a budget is not a boring task when you have the right mindset. Instead of looking at it as just listing out expenses and adding up numbers, realize it is giving you real freedom. With a budget, you can use your money on what matters most, without feeling anxious about the consequences.
Calculate how much you are currently spending on:
- Rent and household bills
- Living expenses
- Financial products (insurance, savings account, retirement plan, etc.)
- Family and friends (going out, presents, etc.)
- Travel (car costs, public transport, etc.)
- Other expenses (clothes, entertainment, hobbies, etc.)
Knowing your current financial status will simplify the process of creating a budget. It will be evident where your money goes and whether you are overspending in a certain category.
Set a Savings Goal
The key to achieving your financial goals is knowing what they mean. When you prioritize your goals, you are more likely to find the motivation to work towards them. Your savings targets may be anything; here are a few ideas:
- Purchase a car without taking out loans
- Going on a holiday without worrying about monumental bills afterward
- Saving money for maternity or paternity leave.
It is also important to mention that some portion of your savings is not to be spent. Emergency savings will ensure certain life situations will not become a financial disaster. For example, you never know when you will be faced with medical bills or put on leave.
Put the Budget to Use
There is no benefit in having a budget if you don’t follow it. Every time you need to make a big spending decision, align it with your budgeting plan. Referring to it on a monthly basis should be enough to see your progress is also a good idea. The sooner you realize you are failing to stay within your budget, the more likely you will be able to stay on the right track. If something changes, such as your income or bills, update the plan accordingly.
Tips on How to Manage Your Money Better
There is always time to learn good financial skills. Taking control of your finances is a complex issue, but you just need to know where to start. Here are the best money management tips that can change your relationship with money in 2019:
- Keep track of your income and expenses – spending money here and there eventually adds up to a big monthly bill. Have a clear picture of where your money is coming from and where it goes. For example, save your receipts and write down your purchases
- Limit your unbudgeted spending – having a budget creates a sense of financial security. However, you should account for little things you can’t predict and minimize them when possible. It is okay to sometimes go outside the budget – you just need to be reasonable
- Don’t make additions to your recurring monthly bills – certainly, don’t take out loans before everything is settled. Additional obligations will only make it harder to figure out a new spending plan and adhere to financial rules
- Find the best deals – for a consumer, there is no shame in looking for the best prices. For example, when you’re shopping in a store, check the prices online. Just a simple comparison may save you a lot of money, especially in the long run
- Limit your credit card spending – many people treat credit card balances too lightly. Despite the temptation, you shouldn’t leave the problem of paying off the balance for the future. If you think you can’t afford it now, don’t buy it
- Deposit money into your savings accounts monthly – if possible, automate the process. By routinely sending money to your savings, you will save a considerable sum without even noticing it.
Adopting New Money Management Habits
Being good with money takes practice. At first, budgeting, planning, and being smart about your purchases can be a hard transition. However, the more you practice new rules, the more they become an inherent part of your thinking process. If you slowly start incorporating new habits, you will see the improvements in your finances with time.
These are a few daily habits that will help you learn how to be better with money:
- Keep the money in your wallet to a minimum
- Properly maintain your car
- Open your bills as soon you get them (not necessarily pay them)
- Create a rough meal plan every week
- Take advantage of coupons and promotional codes
- Read educational, financial resources
- Learn to say “no” to others – your friends, kids, etc.
- Reward yourself once in a while
Overcoming Financial Struggles Effectively
There is no reason to neglect basic money management – not only is it easy to introduce this into your life, but it will also significantly improve the quality of your life. Effective money management is about making a plan and sticking to it. However, the situation is different when you are in debt.
The way you spend money is heavily affected by your credit score and your total amount of debt. If you are living paycheck to paycheck and struggling to live debt-free, it is time to tackle the problem head-on. With the help of these tips for improving your financial habits and specialists from DebtQuest, you will soon be able to achieve a more comfortable state of living.