Learn How to Manage your Money
Money management is a lifestyle and as such it should be incorporated into your daily “to do list.” Money is managed to assist you in accomplishing your financial goals, whatever they may be. Ultimately, you must remember that in order to be successful with this lifestyle you cannot spend more than you earn.
The very first step to managing your money is to look at what you spend in black and white, either on a spreadsheet using Excel or any other similar software or just keeping a record of what you are spending on paper. Look through your credit card statements and checkbook(s) and document every penny that you have spent in the past month. For those who are more ambitious, go over what you have spent in the past few months. Now you need to document everything that you spend for the next few weeks, or strive to document your spending on a regular basis indefinitely.
Now that you have tallied your expenses you need to take a very close look at your income including paycheck stubs, dividends, bonuses, interest income, child support, alimony etc. This would include all the monies that you receive on a regular basis.
Ok, so now you know exactly how much money you spend monthly and how much money you earn monthly. Hopefully, you are not spending more than you actually earn. At this point you need to make a calculated decision on how much money you need to spend (remember there is a big difference between need and want) and divide that amount by 12 (representing the 12 months in a year) and there you have your monthly budget.
Things that you should remember:
- You must decide on the expenses that are absolutely necessary (your utilities bills) and the expenses that are unnecessary, like that Starbucks coffee. Be very honest with yourself about your needs and wants.
- Set priorities for yourself, such as investing in your retirement and your 401K to match your employer’s contribution. Have investments for your retirement deducted directly from your paycheck, this allows the taxes to be deferred. After you have set priorities then you can begin to manage your debt.
- Remember that approximately 60% of your income goes toward spending and the remainder should include retirement, entertainment, emergencies, paying off your debt, etc.
- Try to establish an emergency fund, as this will help keep your credit cards from being maxed out. It is better to payoff an unexpected event with an emergency fund than a credit card, as you are charged interest on a credit card. If you must use your credit card try to pay-off the balance immediately to avoid interest.
Learn to cut back on expenses:
- Do you really need the complete cable package? Do you need cable at all? It’s all about making small sacrifices.
- Use coupons at the grocery store, make a list of items that you need from the store and stick to that list. Grocery stores usually reduce their product prices every 12 weeks, so pay close attention. Buy off brand items when you can and try to stock up as much as possible.
- Take a close look at your spending habits and make the necessary adjustments.
Remember budgeting is a lifestyle change, so be patient and stick with it. You may not succeed the first month, but do not give up. Be determined to succeed. Make sure you document everything this is the key to changing your bad spending habits.
Good Luck!!
