Why You Need Money Management
Have you always wanted to be able to go on vacation but somehow you just never have the right amount of money? Do you find at the end of every month you seem to be deeper in debt that the month before? Are you unable to identify what you spent your money on? Or do you just want to have better financial freedom? Well if your answer to any of these questions is yes, then this is just the article for you. You need to learn how to manage your money and that is exactly what you should be able to do by the end of this article.
First of all, let us understand what exactly Managing money means. In a few words, it is understanding the source of your money, systematically regulating how you spend and save it and ensuring it is effectively divided to cater for the different financial priorities you have.
When you learn how to manage money you will have better control of your life and most of your financial priorities will be covered meaning, less chances of running bankrupt and more chances of doing the things you always wanted to with your money.
So how do you go about managing money?
To start with, let us list the strategies we need to employ and then we can explain them a little more later: as you read through this list try and imagine ow you can apply them or see if you can understand them even before we get to the detailed explanation.
– Track and record your expenditure
– Identify your sources of income
– Budget and prioritize
– Make plans to pay off debts
– Review your financial standing periodically
– Get a manager
Okay now let us expound on each of these 7 strategies for managing money
Track and record expenditure:
Do you sometimes get money and at the end of the day it just seems to have vanished and you can’t quite say what you spent it on? Well, that would be because you do not track your expenditure. First off you need to sit down and write down what you usually spend your money on. Right from the essentials like rent and food down to simple things like coffee, gum or giving money to a homeless person. This documentation will be necessary later in the managing process. With that done, continue to write down everything that you spend on and this should become a daily habit for just about the rest of your life.
Identify your sources of income:
It is important to know where your money comes from, how much comes in and how often it comes in because money is what you are managing and to manage it you should know where it is coming from and see if there is any possibility of increasing the inflow or foresee how long it will keep on coming in so that you can plan ahead.
Budget and priorities:
Now here is where the information you collected earlier will be very useful. Since you know what you have been spending money on and you know how much is coming in and where it comes from, it is time to reallocate the expenditure to see to it that priority areas get taken care of. Rent, food, transport, other living expenses, financial obligations including debts should all receive adequate potions from the budget, you should also find a percentage that you can save. As you budget you can also take the decision to cut down on certain expenses. If for example you always buy a coffee and sandwich on your way to work, you may want to try preparing your own coffee and sandwich from home instead, if you are drinking beer every day, maybe you can cut down – after all it will be healthy for you. The bottom line is set out how you are going to spend your money in the best possible way so that you do not end up in debt and make sure you follow that budget to the later.
Make plans to pay off debt:
This should be part of budgeting, but it needs to be explained on its own. Many people get confused about how to pay off debt. You might be one of those who finds themselves using one credit card to pay off the debt on another and then getting a new credit card to pay off the other. Well when it comes to paying off debt, you should first look at the interest rate, the one with the highest interest rate should be the one you pay off first because if it accumulates you end up with more debt. Try not to borrow to pay debts, instead in your budget try and free off some money from unnecessary expenses so that you have more money to pay off the debt and talk to your creditors to work out a plan that suits you especially if you are way in over your head in debt.
What do you do when an emergency pops up? Where do you get the money to attend to the emergency? How will you finance that dream vacation you have always wanted to take? How will you get that new car you wanted? Well, the answer to all those questions should be by saving. We all need to have money saved up somewhere, however, little it may be, it is a start and you can pick up from there. Make sure you can save a certain amount of money every month because it will help you meet your financial goals.
Review your financial standing periodically:
Part of managing money is evaluating how well you are doing. At the end of the month, you should evaluate the success you have achieved and see if you have managed your money well. You also should do it at the end of the day to see what you spent on and if it is in line with your budget.
Get a Manager:
This should only be as a last resort and after you have managed your own money for a while. A money manager can help you manage your money better and hit your targets but remember they come at a price so you would need to have money to pay them. Alternatively you could try online apps that help you manage money.
Managing money is a necessity for everyone, it has great benefits right from helping you live within your means to achieving a number of financial goals which all translate to a better and happier life.