Would it not be nice if there was magic follow of managing money such that you won’t regret ever again? If you are tired of regrets as far as money management is concerned, then it may be time you take a serious approach to manage your finances. A good portion of us don’t know how to handle money properly. Having a sound money management plan may be some light to the end of the tunnel for those struggling with their finances. Managing your money is a discipline that takes time to understand and improve on. To master money management, it takes commitment and a solid understanding of your financial situation.
This article explores critical and fundamental steps to help you manage your money the right way.
Create a Budget
Effective money management starts with having a budget. If you don’t have a budget in place, start by creating one. Creating and sticking to a budget might seem a little bit hard at the initial stages, but it pays off at the final stage. Creating a budget helps pay off debts and start living for future expenses such as retirement, car, and mortgage. A budget will create a balance in your life and assist in creating some peace of mind.
Understanding your Expenses
As most people off their head how much they spend per month on their total expenses and you will , they have no idea in their expenses. Most people have on idea on the total amount spend per month on their most basic needs. The solution to this problem is simply keeping a track of all your expenses. Take all your receipts be it utility bills, groceries, restaurant bills among others and have a summation. The ideas is to have both your variable and fixed expenses accounted for to get a total amount.
Understand Your Income
Again, ask anyone off their heads how much they make in a month and very few will be able to answer this simple question. There is a big difference between income tax and expenses and most people are not aware of the differences. To have a better understanding of your money and hence control it, you must understand all the sources your income streams come from. After you have a grasp of your income, figure out your total expenses and subtract from your total income. If you end up with a negative amount, it means you simply spend more than you make. If you end up with a positive number, its good news. This is the amount you should use as savings.
Consolidate Your Debt
No one likes debt and you should do as much as you can to manage it. The first thing you need to do is to get the debt under control and work towards getting rid of it. Consolidate your debt to one place and try to have it attract the lowest interest possible. Additionally, slash and if possible remove unnecessary expenses. For every money you make, set a certain percentage for saving. Think about creating an emergency fund too.