8 Simple Steps to Manage Your Money
Manage your money refers to use of money in the right way which involves creating a budget, understanding cash expenses and incomes along with tracking the money spent, saving some income for investment and future use, removing avoidable expenses and also having a track of all items to understand the cash spending and generation.
Look at these personal finance statistics in the US which could actually shock you;
- 50% of Americans have less than one month’s income saved for a rainy day. If you have to believe the financial advisors, you need at least six month’s income saved for it.
- 30% have less than $1,000 in all bank accounts at any point in time
- Americans have over $950 Billion in credit card debt
- In total 1/3rd of Americans confess to having not saved anything at all for retirement
Over 50% of mortgage applicants don’t realize that their credit score was the main reason for their loan application rejection
If you recognize yourself in any of those statistics and want to reverse the situation, start your money management now. It is no rocket science and just keeping a simple rule in mind “You need to spend less than you earn”.
In order to start money management, you need to calculate and analyze your net worth & cash flow, get your credit reports, know your credit score, and create monthly and yearly budgets. Only after following these steps you will be able to gauge where exactly you stand financially.
The next thing you will need to do is set definite targets of where you actually want to be financially.
To show you how you could do it, I have created this infographic for you that will help you create a budget, pay off debts and start saving.
If you are good at managing your money it can help you stay in control of your finances and it can help you reach your targets and pay off any debts. There are a number of ways you can do this.
- You can use a good online budget planner to work out your budget in minutes. With that, you will be able to see how much spare cash you have left after paying off your most important bills.
- You can maintain a spending diary which will help you keep a closer eye on your spending. This would be a good way to keep a track of where you are spending your money and what on.
- Aim to pay off your debts first, especially those with the highest interest rates.
- Watch out for non-essential expenses that can be avoided in your budget. Ask yourself a question of whether a particular expense is a “want” or is it a “need”. Of course, you need to cut down on things which are wants.
- The balance number in your checkbook is a critical one as it would tell you exactly how much money you have currently. Ensure you keep an accurate checkbook which includes all the records including ATM/Visa Check Card transactions, checks, deposits. This will help you review where exactly you spend and save.
- Credit card debts are the easiest of traps to fall into. So try and minimize the usage of credit cards as much as possible.
- Acquaint yourself with diverse investment options. The more knowledge you have about financial instruments and possibilities, the better off you’ll be when it comes to investing your money. You will just need to find out which one would be the correct one for you and your needs.
- You never know when you would need a huge sum of money in case of an emergency. For such situations having good insurance coverage can really help overcome those crises.
- Though I am mentioning it the last it is one of the most important points, you need to organize funds towards financial goals such as debt reduction, saving for a down payment, investing for retirement. It’s most important to just start doing it, whichever method you choose.
All this may seem complicated and boring but you need to take the first step and start this process. After which you just need to take care and pay attention to what you’re doing with your money.
Do post comments and let me know your suggestions or ways through which you manage your money.
This has been a guide to Steps for Managing Your Money along with its infographics. We see how knowledge of basic finance can go a long way to improving your financial position. They talk about assets position and how you can manage cash flows. You may have a look at following articles to learn more about money –