Ever felt like you could use some help managing your money? If so, that’s a good thing. Typically people that are horrible money managers are clueless to the fact that they are bad with money. The fact that you’re looking around on the Internet to find information about better money management is a great step in the right direction.
We’re goind to share some ideas on how to manage your money better, but first, let’s turn to an excerpt from another blog that I find interesting. It boldly states that either you control your money or your money controls you. I never thought of it this way, but I guess it’s true. The excerpt also goes on to discuss why managing money is difficult.
Here is part of the article from Rob at DoughRoller.net:
sound money management comes down to whether you control your money, or whether it controls you. As I’ve often said, the good news is that sound, wealth-building money management is simple. The reality check, however, is that managing your money, while simple, is not always so easy.
Two things make managing money difficult. The first is that for most of use, we always want more. We often see contentment not in who we are or what we do, but in what we have. The result is constant pressure we put on ourselves to have more. The second thing that makes controlling our money difficult are the endless issues and options when it comes to money. How much do we save for retirement and where do we invest it? How do we track our spending each month. Should we buy or rent a house? How much life insurance should we buy? The financial decisions we are called upon to make can feel overwhelming.
You can read the rest of this article at doughroller.net.
As the article suggests, it’s true that financial decisions can be difficult. That will never change. But what you can do to help you manage your money better is to adjust your habits and look critically at how you are currently managing your finances. Then, look at how others do it and see if you can make some improvements.
We’ve put some thought into this subject and have a few ideas to help you get started.
How to Better Manage Your Money
Tighten Your Spending
First of all, money management is ALWAYS better if you can increase the amout of money in your savings or investment account. The only real way to do this on a day to day basis is to spend less. Of course, over the long term you can work toward earning more money, but throughout your life you should try to haul in your spending as much as you can. Every dollar that is saved today will be worth twice that much a few years down the road.
The best way to do this is by living below your means. That means if you make $50,000 a year, live like you make $40,000 and save the rest. If you are barely getting by on $50,000 a year and suddenly get a raise, don’t change your spending. Live frugally and below your means your entire life and you will be able to retire years earlier than other people in your same salary class. Don’t feel trapped by living frugally, you can still splurge on some items, just make a few wise choices each month and the money will start adding up.
It’s especially important that you tighten your spending on big purchases. Don’t overspend on a house unless you’re sure you can afford it. And when it comes to declining assets like cars, don’t overspend. A car loses half its value in just three years! That same money invested in the stock market could be worth 130% of its value in that same time.
Look at each financial decision and ask yourself whether this is the best way to spend or invest your money. You’ll be surprised at how much less money you can spend if you just pay attention.
Make Saving and Investing a Habit
Good money managers have one thing in common. They are habitually good with their money. Make saving and investing a habit by having money automatically deposited into your savings account each month. If your employer offers a 401k plan then take full advantage of it. If you’re self employed, set up your own 401k account through your online broker for free. If you have to go the bank each month and manually deposit cash to savings, then make that a habit. People that make saving a way of life do much better financially.
Keep Track of Your Finances
If you really want to manage your money, you should create your own budget and keep track of every expense and income component. However, it may be unrealistic to expect that of most people. Even so, you should still keep good track of your finances. I know many people that only know how much money is in their bank account by checking their balance at the ATM. These people live paycheck to paycheck and often overwithdraw from their accounts.
If nothing else, make sure that you keep your checking account balanced. Start a spreadsheet that lists your checking account transactions. It’s very simple. Put the date, the amount, and the source (check number, atm, debit, or ACH), and a description of the transaction. Then have a column that calculates a running total of your expenses so that you always know how much money is left in your account. Doing a simple task like this can actually help you plan your future expenditures, and even motivate you to cut your spending.
Have an Emergency Fund
Part of being a good money manager is to be prepared for unforeseen events. Although you don’t know what it will be, I guarantee that you will have dozens if not hundreds of financial emergencies over your lifetime. Okay, maybe not “emergencies”, but things that you need to come up with a payment for that you never considered. Having a fund to cover these expenses is important. If you don’t have the fund, you may end up going into credit card debt and really getting into trouble. Plus, having an emergency fund like this can give you piece of mind and help reduce stress caused by money situations.
The real point here is that it’s important to take care of the little things when it comes to money management. Being organized and frugal can greatly increase your financial success rate and can lead to great benefits down the road like financial security and maybe even early retirement. Start managing your money better today.