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Three Tips for Better Money Management
Money management may seem like an impossible feat to conquer, especially if you are guilty of overspending each month. There are a few steps you can take to better manage your money, which can help you get yourself back on track with minimal effort. From creating a budget to tracking your spending, you can take the steps necessary to learn better money management skills. Once you have discovered what works for your lifestyle, you can create new ways of managing your money both short-term and long-term.
When you understand how to manage your money properly, you can establish a savings account and consistently contribute to this account each month. All you need to do is calculate your net income each month and then follow these three helpful tips for better money management. Once you have learned how to manage your money, you can boost your credit and work toward creating a more financially sound future for yourself.
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1. Create a Budget and Stick to It
One of the easiest ways to manage your money is to create a monthly budget for yourself. When you create a budget, it is essential you include all monthly expenses to ensure you are designing a budget accurately reflecting your purchases.
The first step toward creating your budget is to determine what your net income is each month. Whether you are paid weekly, bi-weekly or you work for a salary, you have an existing knowledge of how much you earn through your current job. If you work an additional part-time job or you earn income through freelance work, you must calculate these totals into your net income to have an accurate reflection of how much money you make.
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After you establish your net income, create a separate list of each expense you pay out during the month. These expenses include the following:
- Phone bills
- Auto payments
- Monthly subscriptions
- Monthly prescriptions
- Credit card payments
- Student loans
Any recurring expenses you pay each month must be reflected within your budget. Subtract each of these payments from your net income to determine how much you must make to cover the cost of essential expenses. The money you have leftover each month can be placed into a savings account, put toward concert tickets or can help fund a new wardrobe for a job opportunity you have recently received.
Regardless of how you choose to spend your leftover cash, you must strictly adhere to your budget if you want to better manage your money. If you veer off course from your projected budget, you may find yourself struggling to make payments for essential items or services you need to pay at the end of the month when money is typically tighter.
2. Track Your Unbudgeted Spending
While you do not need to budget out every tiny expense you anticipate making throughout the month, it is useful to track your unbudgeted spending to some degree to ensure you are not wasting money on unnecessary purchases. For example, if you track your spending and realize, on average, you are spending approximately $5 to $10 each day on coffee or takeout, this can drain your bank account over the course of the month.
You may not consciously realize how much extra you are spending because paying $5 a day for a cup of coffee does not register as heavily as it would if you were paying $500 for one item. When you track your unbudgeted spending, you gain an understanding of where your money is going, which can help you better manage your expenses.
You can track your spending with a money-saving journal or you may choose to utilize one of several money-saving apps available through your smartphone. Regardless of how you choose to track your unbudgeted spending, it is always important to be mindful of how much you spend on any given item. Small expenses add up to large amounts over the course of the month and reducing these expenses can help you save more money in the long-term.
3. Be Mindful of Your Savings
The key to mastering money management is to remain mindful of your savings. You may not have an established savings account, but you can still work toward increasing your savings each month, which can help fund larger purchases when they become necessary. For example, you may need to replace the tires on your car, but you are putting this expense off because you do not have enough saved up to make such a large purchase.
When you budget your recurring expenses and track your spending, you provide yourself with a clear perspective on how much you spend versus how much you save. In doing so, you can find areas in your lifestyle where you can cut back on spending to increase your savings.
If you know you have a large purchase looming on the horizon, cut back on how many times you order takeout during the week. Going from buying food five or six times a week to only two or three times a week can provide you with the added savings on your food expenses you need to replace your tires, buy a plane ticket or pay down your student loans. When you are financially sound, you can create a savings account where you deposit a certain amount of money each month, which you can then pull from if you need extra cash.
By creating a savings account and contributing to it regularly, you are providing yourself with larger sums of money not associated with interest fees. You may believe you can tack your expensive purchases onto your credit card each month and this can be utilized during emergencies, but ultimately you risk paying high-interest rates.
When you have a securely established savings account, you are providing yourself with added financial security without risking your credit score in the process. Set aside a small amount of money each week to be placed into your savings account. The amount may not seem like much at first, but you can steadily build your savings throughout the year to a more desirable number.
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