Money management is the strategic planning of your earnings. The goal is to make your money produce the most significant interest-output value for any expenditure.
You can manage your money management effectively in three simple steps: tracking expenses, budgeting, and saving.
Tracking expenses
Keep track of your income and expenses accurately.
There are many tools to help you track your payments easily, from daily spending to annual commitments. These records place you in a better position to balance income with expenditure and develop a workable saving plan.
If you know how much you have to spend and save, you avoid unnecessary spending and train yourself to be a wiser money manager. You will also understand why you have recurrent debts and how to escape these ties.
Below are the guidelines for tracking your monthly expenses:
- Check your account statements—Review your account and credit card statements for a picture of your actual spending. If you keep track of what’s coming into your accounts, you will easily see where your money disappears to each month.
- Categorize your expenses—Group all your costs into fixed or variable expenses. Fixed expenses must be paid regularly each month, such as insurance, mortgages, utilities, and debt payments. Variable expenses like clothing, food, and travel need to be adjusted to fit your monthly budget.
- Use a budgeting app—Downloadable apps make budgeting easy and fun. Google Play and App Store have many of these tools that let you budget as you spend—choose one that captures your attention and looks easy to navigate.
- Explore other expense trackers—Your budgeting app isn’t the only tool you can use to plan your income and expenses—there are many free budget templates online. If you have a more complex financial portfolio, it is better to use PC software.
- Identify areas for change—As you track the data, you might identify unnecessary spending. Adjust these habits to either increase your saving or divert that money management toward fixed expenses.
Budgeting
Take charge of your spending by creating a realistic budget. It ensures that you will have enough money for your needs and priority expenses each month, and helps you avoid unnecessary debts. It will also help you formulate a strategy for escaping existing debt.
Budgeting is about balancing your income with your expenses so that you have enough left to save and invest.
Below are budgeting tips to take your money management to the next level:
- Budget upfront each month—You don’t need a new budget every month; you can copy a template and adjust it.
- Budget to zero – First, add your income, and fixed and variable expenses separately. Then, subtract the expenses from the income and channel the balance into debt or a saving account.
- Track every expense—You can only start spending wisely once you understand where each cent goes toward spending and saving.
- Review your spending habits—Find out where your money goes by reviewing your actual spending, and checking whether it aligned with your original budget.
- Set a realistic budget—If you’re overspending each month on a basic need, you may have to adjust that figure on the budget. Remember to balance it by reducing something else.
- Budget for miscellaneous spending—Set aside money for other expenses so that you don’t buy impulsively and overspend.
- Save for big items gradually—Monthly sinking funds help you stay on track with your budget.
- Make adjustments—Adjust your budget for any expense that may arise as your needs change.
- Budget for fun—If you have extra funds, slot in monthly entertainment expenses.
Saving
A good income isn’t a guarantee that you will save—you have to plan it. It is best to begin saving while you are young and productive, but it is never too late to start if you’ve missed that window.
Below are helpful saving tips for all ages:
- Re-use—Don’t dispose of your household items indiscriminately. Find and re-use plastic bags, jars, or newspapers that are in good condition.
- Spend extra income wisely—Use the surplus to repay debt instead of splurging.
- Make stuff–There are so many things you can make at home for cheaper than you can buy it. For example, mixing vinegar and baking soda gives you an excellent cleaning agent.
- Cancel automatic subscriptions—Turn off auto-renew and consider switching to cheaper utility providers, like BGE Electric.
- Budget wisely—If you stick to your budget, you will have extra for savings or loan repayments.
- Save money automatically—Set up your bank account to automatically transfer money from your checking to savings account every month. It’s cheap and convenient.
- Drink coffee at home and carry a water bottle—It will reduce the cost of drinks when you are out.
- Reduce energy cost—Buy energy-efficient appliances and LED lightbulbs, and repair leaky pipes. It goes a long way in reducing your energy bills.
- Sell unused items and save that money–sell stuff you rarely use.
Managing your money is challenging, but success isn’t far away. Track your expenses, budget correctly, and save enough for a long and happy life.