Everyday Money Management Skills to Get Your Finances in Order
Most people struggle to manage their money effectively. It’s hard enough to keep up with the bills and daily expenses, let alone set aside money for the future. However, the truth is that there are many things that you can do to improve your financial health, provided that you develop some simple money management skills. The problem is that it’s difficult to know where to start – it’s easy to become overwhelmed by the amount of advice that is available.
Here is the best advice of all – pick one thing you know that you can do and then stick to it. There’s plenty of time to add additional things once you have a taste of success. Here are some ideas to set you on the path to better personal finances.
Keep track of your spending
Do you come to the end of the week and wonder where all the money has gone? It’s so easy to fritter away money without realizing it. For instance, how much money do you really spend on food, when you take into account buying lunches, having the occasional coffee or grabbing snacks? If you don’t know how you are spending your money, then it’s impossible to start using it more wisely.
Start by writing down everything that you spend in a week. The best way to do this is to carry a little notebook with you where you record each purchase as you make it. At the end of the week, go through all of the items and group them by type of expenditure. Then, target the areas where it’s clear that you are spending too much. This doesn’t necessarily mean you have to give up things that you enjoy – in fact, reducing unnecessary expenditures will free up money so that you can use it where it does the most good.
Clear your credit card balances
Would you borrow money at 15% APR or more on your credit card and then put it into a savings account to earn 1% interest? Of course not. When you don’t pay off credit card debt when you can, this is exactly what you are doing. Make paying off your credit card balances a priority over savings or other investments. You will be surprised how quickly the amount you owe starts to come down, since the amount of interest you are paying will reduce over time and more of your money will go to paying off the actual balance.
Save a regular amount for the future
Once you have your spending and debts under control, it’s time to start saving regularly. A good guideline is to set aside 10% of your income to build a nest egg. This will give you a buffer for emergencies and set you on the course to a prosperous retirement. Keep on doing this even if you start to earn more money – don’t spend all of that extra money when you get a raise. Put this 10% in to safe investments, since you want to make sure that the money will be there when you need it. There’s nothing wrong with making more risky investments with higher returns if you have extra cash to spare, but keep that first 10% safe.
Having good money management skills is important if you want to make the most of the money you have. You can learn more about money management on the Better Money Skills web site..