Managing money is a complex thing to do. With all the math and technical jargon involved, it’s no surprise why people take complete courses on it. So don’t feel bad if you have no idea how a budget works or how much of your paycheck you should put towards your savings account. Here you’ll learn some money management tips that will help you to keep your personal finances on point.
1. Don’t spend money you don’t have!
This one is quite obvious, isn’t it? Well, you might be surprised, but many people have the problem of spending way more money than what they actually have.
How is that even possible? Let’s say the brand new model of your favorite smartphone was just released or you finally find the chance to buy the car you’ve always dreamed of.
You could get your smartphone and charge it on your credit card or take a loan from the bank to pay for your car. Well, if you did that, you’re basically spending money that isn’t yours.
It is true that these payment methods are intended to help, but most times using them means you’ll get pending debts, and let’s face it, no one likes to have debts.
One way to avoid these is by using these financing instruments properly. Nevertheless, sometimes it could be wiser to leave them aside and only spend money you already own.
2. Make a monthly budget
Being one of the most used practices in finance, budgeting is one of the most important money management tips. This is as simple as calculating an amount of money you will need during a specific period of time or for a determined activity.
Applying a monthly budget will help you to know how much money you earn and how much of it you spend. If implemented properly, it could also help you to reduce your expenses and prioritize your saving goals.
There are several ways in which you can budget your money, so make sure to learn more about what a budget is and how to make one of your own.
For starters, you can opt for the 50-30-20 rule. This strategy is as simple as dividing your income into three portions: needs, non-essential expenses, and financial goals.
3. Know your priorities
This tip can go hand to hand with number 2. While you make up your budget, you’ll come to know what your financial priorities are.
You’ll find that your basic priorities are common first need items, such as food, clothing, rent, etc. However, your occupation and lifestyle will also get a say in this. For instance, if you work as a freelance English teacher online, you’ll need to buy a good computer and pay for the best internet service you can afford.
To keep up with knowing your priorities, make sure to follow the Pay Yourself First principle. This one states that you should use your money on essential expenses and saving goals before anything else.
For instance, as soon as you get your paycheck, make sure to set aside some money for your investment fund and pay off what’s pending on your credit card debt. All the rest of expenses like that smartphone upgrade or that new pair of shoes can wait.
4. Start different saving funds
While making your budget and setting your priorities, you also need to keep in mind a “what if…” situation.
It is not about being pessimistic, but what if you lose your job next week? What if your car breaks down and you need some money to fix it? What if you get sick and need to pay for medical care?
To prevent all these kinds of circumstances, it is recommended to start an emergency fund. Whether it is a medical emergency or any kind of domestic disaster, you need to be financially prepared to solve it yourself.
On the other hand, you can have a different savings funds to put money towards your goals and dreams. Maybe you want to get a master’s degree, take a trip around the world, buy a house of your own, or even save for your retirement.
The younger you are and the sooner you start saving, the more money you will have available in the long run.
5. Invest a portion of your money
Last but not least, one of our best money management tips is to invest.
Having different methods of earning money is always good. You can work on your main job and keep a side hustle, but what if you could put your earned money to work for you as well?
Yes, as cool as it sounds, you can start investing in the stock market and give your savings a good use. It will not only protect your money against inflation, but it can also generate a source of passive income, depending on your investing strategy.
Also, imagine how cool it would be to brag about owning shares of some of the top companies in the world!
The bottom line
No one knows everything, so don’t be ashamed if all this money talk is somehow new to you.
Follow these money management tips and you’ll see that taking control of your money is actually easier than you think.
Also, make sure to check the rest of the articles on our blog to learn more about personal finance and some simple ways to save your money.
