Everyone wants to have a financially secure life. But to achieve such a feat, one must learn how to budget and save money whilst avoiding or reducing debt at the same time. Unfortunately, not everyone is well aware of how it works.
Money management might look complicated and stressful at first glance. However, with the proper knowledge and mindset, you’ll soon figure out how to gain control over your finances. Here are a few tips to help you make it happen.
The concept of money management
Money management refers to the process of keeping your expenses below your income and hitting your savings goals. It’s an effective way to manage your money and help you stay out of debt.
The blueprint of money management
Create a spending plan
In money management, the first step that you need to take is to learn how to budget. You can start by selecting a system that you’re comfortable with when handling your money.
One of the most popular systems that people use is the 50/30/20 budget plan, which puts 50% of your income for your needs, 30% for your wants and 20% for building your savings and managing your debt.
Monitor your expenses
By creating a list of your expenses, you can know where your money is going. You can also use it to adjust your monthly spendings so as to align well with your financial goals.
Learn how to save
As you slowly manage your finances little by little, you’ll soon see a few opportunities to save. Over time, you’ll get so used to saving money that it’ll quickly become second nature. It’s also important to learn the difference between saving for your future and saving to spend later. Saving for a holiday, or car is saving to spend, whereas saving for a home deposit is for your future.
Manage your debt
Getting yourself out of debt can be tricky. That’s why you need a strategic approach to help you become debt-free much faster. It’s highly advisable to manage your smallest debt first whilst making minimum payments on the rest. Doing so will help build your confidence and reduce your mind-clutter, until you pay the biggest debt off. It’s a bit like training for the olympics – your biggest debt is like the olympic finals, which you can be much more confident with, if you’ve done lots of training runs beforehand on your smaller debts.
Build your credit score
Your credit score determines if you’re eligible for loans and the rates that you’ll need to pay on them. To ensure that you have an excellent credit standing, you need to make it a point to pay all your bills on time. This will help you build good credit habits and keep your credit score in good shape.
Invest in your future
Aside from thinking about your financial health now, it’s equally important to also save up for your future. So, it’s better to start building your savings for a home by setting aside a portion of your earnings and let it grow through compound interest until you can buy. Keep in mind that your ultimate goal is long-term financial stability. Building your funds for your retirement can also help you feel more secure.
Limit your credit card use
When appropriately used, a credit card can help you with your finances. Nevertheless, studies show that we spend between 20% and 60% more when using a credit card, so for discretionary spending, credit cards can be one’s worst enemy. If you feel the urge to use them it might be better to take the card out of your wallet, unlink it from your phone or watch and leaving it at home, or in the car. Giving in to that feeling could only lead to unnecessary spending, which will just make you feel bad later, especially if the things you want to buy aren’t important.
Get your finances back on track
Being good with money takes time and practice. There will be times when you won’t plan your budget correctly or put off purchases that you don’t need. But it doesn’t mean that you should already give up.
Money management is like a financial food habit. The more you do it regularly, the more it becomes a part of your lifestyle. When that happens, it’ll be much easier to manage your finances which puts you in a much more secure future.
If you need help in money management, we can help you get on track. Golden Eggs can offer tailored money management solutions that can help you stick to your budget. Contact us today.