Basic Steps to Better Money Management

Basic Steps to Better Money Management

Better Money Management: For many people, thinking about money is stressful, mostly because they don’t think they have enough. But you don’t necessarily need a better job or an inheritance to feel better about your finances. In most cases, all it takes to achieve financial goals is improved money management. If you’re in a financial rut but want to enhance your ability to invest and save, here are some basic steps to better money management.

Table of Contents

Figure Out Where You’re Spending

The first step to improved money management is learning how much you’re spending — and where. You may have a sinking feeling that those daily lattes are having a negative effect on your finances, and you’re likely right. But the only way you can improve your situation is by tracking your spending each month on discretionary things such as that everyday coffee, clothing, and dining and entertainment. After you’ve determined where your money’s going, you can create a plan to do better.

Establish a Monthly Budget

You may have been resisting doing this, but it’s an imperative if you want to create better habits. A week or so before the month begins, figure out how much you need to set aside for bills and savings and for things such as planned travel or a friend’s birthday gift. One proviso: the monthly budget must be realistic and include room for some things you want rather than need. That’s the only way you’re going to stick to it.

Build Up Emergency and General Savings

Many people do okay until something unexpected such as a car breakdown happens. Then, because they don’t have an emergency fund, they pull out their high-interest credit card, which puts them in debt and can cause more serious problems if they fall behind on payments. Aim for a fund of at least $1,000.

You should also establish general savings in the event of job loss or some health issue. If your employer offers direct deposit, consider having a portion go directly into a savings account. That way, you don’t have to remember to put funds aside.

Make Your Payments on Time

Having good credit is important to one’s financial and overall wellbeing, so you don’t want to miss any payments, particularly on credit cards, since that also means late fees. Making payments on time, and hopefully in full, can also improve your interest rates. If you’re already behind on your credit card payment, get help at www.freedomdebtrelief.com.

Drop Unused Monthly Subscriptions

Maybe it’s only a few dollars a month, but every subscription that you don’t use or chronically underuse is a waste of money. Compounding matters is the fact that many of these subscriptions – to online publications, job-finding sites, etc. – are automatically renewed. Check your bank statement for such renewals and drop recurring charges for things you no longer use.

Save for Large Purchases

If you’re planning to make a big purchase such as a new computer or refrigerator, for example, save for it. Paying cash is cheaper than using credit; you can avoid interest charges and having that debt over your head for who knows how long. In the interim, your savings for the item can grow in a bank account. 

Start Investing

You don’t need a lot of money to start investing. Even small contributions to investment accounts can help your hard-earned money grow. You may want to open a retirement account and if your employer offers matching funds on your 401(k) account, take advantage of what essentially is free money.

If you use these basic steps to better money management, and commit yourself to them, you’ll create habits that will last a lifetime. Remember that the first steps are finding out where your money is going and getting your spending under control. If you need to get out from under serious debt from credit cards or other unsecured obligations, contact Freedom Debt Relief.

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