Wanting to understand money management is a sign of maturity that shows you would like to live a simple life without the messy consequences of debt and a life without savings. Learning how to manage your finance not easy, but luckily there are many resources to help. It’s undoubtedly scary, but once you get the hang of it, you’ll be better protected from unexpected expenses that life will throw your way. It’s best to learn money management early on in life, but even if you didn’t and have made consequential financial mistakes in the past, please remember it’s always better to start planning now. As tricky as money management can be, some simple financial habits will help you lead a life where you’re not continually fighting debt.
Gather Information and Prioritize
No hogwash and no beating around the bush can help you manage your money. If you’re bad at it, you need to go back to the basics and re-learn. First, for handling your finances, you need to gather information like your monthly income, expenses, money that you get from side gigs, etc. This process may be slightly more time-consuming for freelancers, but it is crucial. Then start tracking where your money goes and create files for different expenses, such as auto, home, utilities, and so on. If you’re paying for student loans, add that too. After doing this you should have thoroughly assessed how much you earn and how much you spend.
The next and equally crucial thing to do is to set your priorities straight. Prepare a prioritized list of your expenses, meaning the top of the list are expenses to maintain groceries, a safe and warm home, and maybe car expenses such as gas to get to work. Continue to map out your expense by writing out what debt you owe and keep that next to the prioritized list of expenses. Life is full of unexpected expenses, so make a list of random expenses that may occur soon such as new snow tires for the car.
Times can turn uncertain quickly, and the most stable lives can topple if there’s no preparation. It’s completely alright if there are greater stresses in your life right now, like debts to pay and people to take care of. Creating an emergency fund can be beneficial especially if you have children or other people that depend on you. The tiniest of amounts can prove to be significant in the face of adversities. Cruel substances can be an unavoidable part of life, but tackling them doesn’t need to be. In case you or your partner lose a job, or there’s a medical emergency or anything that can potentially drain your peace of mind, an emergency fund will come to your rescue. Even if you save little amounts but save them consistently, you’ll breathe easier when the situation strikes.
If you’re babysitting on the side, save that money in another account and don’t touch it. Limit your credit card purchase, especially if you have the habit of spending a lot. Be very careful about the loans you’re taking, and avoid any monthly recurring bills you think you can do without.
Make Plans for Unbudgeted Spending
This may seem obvious and effortless at first, but it isn’t. That’s precisely why this point needs to be mentioned here. This part of creating a budget requires consistent execution and monitoring since it can tip the other aspects off. Life should be appreciated and enjoyed, and if there’s any money left after you’re done with all the lists and the numbers, you deserve to spend it on entertainment. However, one movie ticket can quickly turn into six, and ordering a bag online can soon turn into a bag and a pair of shoes and a stunning coat that you don’t need. Spend your unbudgeted money but to a reasonable extent.
It can be tempting to get side-tracked and empty your pockets if you don’t set a limit. If you have any big purchases planned for this month, double-check if it aligns with the rest of your monthly plan. It’s a critical financial habit that needs to be practiced consistently. This way, you’ll save yourself a lot of trouble, and also save more money than you used to. Continue adding and subtracting from your monthly budget to have a crystal clear idea. Since bigger purchases are easier to remember, make sure you carefully record small purchases as well.
These were three money-management tips that will help you make informed and better decisions regarding your finances. See what works for you and keep up with the plan. Don’t hesitate to contact an expert for long-term financial growth or if you want to know how to handle your credit card debt and saving goals.