Money is an essential part of our everyday lives. We exchange it for goods and services that we need to live. However critical the necessity for money is, the predictability of a steady flow of income is unsure. Especially in this economy many have the looming possibility of a layoff or reduction of income in some way or another.
That is why the best thing we can do for ourselves is get out of debt, prepare an emergency fund, and then invest as much income as possible during the good times. This will help us be prepared for when we need additional money in the future. Below are some tips on money management to help you achieve those goals
.As a start you should absolutely be using a budget and understand the relationship between your income and your expenses. Make sure you are very clear and ensure you are bringing in more than you are sending out. This isnt always easy to determine because high interest credit is available to most people.
The best way to put together a budget is to begin by tracking your expenses over a period of time. I would start by doing this over a period of a month. Once you have done that, categorize your expenses into specific categories you will use over and over. Examples of these categories are utilities, mortgage (rent), entertainment, clothes, food, etc. Each month you will want to allocate a certain part of your income to those necessary expenses. That will tell you how much is left over for unnecessary expenses and saving for the future.
Be honest with yourself when distinguishing between needs and wants. This is critical in the budget building process. Utilities like electricity and natural gas are needs, but do you really need every single movie channel out there in your cable subscription?
Use your budget month after month and you will very quickly begin to understand how you spend your money and be able to take control of it. After you have a budget in place you can begin to make some headway in improving your finances.
The second way to improve your financial picture is to slash your debt. Getting out of debt is critical to any personal financial plan. It is especially essential if you have any high interest debt at all. If you do have high interest consumer debt, you should take action immediately to move that debt to lower interest loans. These loans can take the form a few different possibilities. One is to use lower interest credit card balance transfer offers to transfer balances to these loans. These are good as long as you get rid of the old card and dont jack it up. Also, make sure you understand how long the offer is for. Get the balance paid off before the end of the offer or you may be facing higher interest rates than your old card.
You should snowball your debt payments until you only owe money on a house and cars. If you can get those paid off that would be great also.
Third, after you get out of consumer debt, save up enough money in an easy to get to savings account to pay your necessary expenses for 3 to 6 months. This is very important as if something happens like you or your spouse get laid off or get sick, you will have cash available to recover without going into your retirement savings.
Finally, once you have an emergency fund in place, start investing your money in investments that meet your risk tolerance. Typically the younger you are the more risky you can be and the older you are the less risky you want to be. Get some good professional advice on this. Save as aggressively as possible because you never know what you will need in the future.
Those are my four best tips for you on managing your money. These simple, yet extremely important ideas are critical to building wealth, protecting yourself from an unexpected financial downturn, and if used will go far in helping you stay financially healthy throughout your life.
As a CFO, I manage money all day long. As a Content Publisher and SEO, I publish researched informational articles about topics I am interested in almost every day. Because money management topics are a passion of mine I publish a number of articles concerning Tips on Managing Money.
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