What is money management ?

Money management refers to the process of how an individual budget, save, spend, or invest their money. Nowadays, it is essential to manage your money carefully as it only gets harder to live due to the increasing population, fewer jobs, increased expenses, and many more. Therefore, it is crucial to identify how you respond to financial decisions, understand the foundation and basics of financial markets and products, and to create a plan that helps you to reach your higher goals in life. Here are the top 05 methods you need to know to manage your money.

  1. Use a savings account: The use of a savings account will help you to resist any temptation in spending on unnecessary things because the best solution to resist temptation is to get rid of it. Suppose you deposit a thousand dollars to your checking account; it will get spent very soon. Instead, deposit the amount to a savings account and then transfer money to your checking account, this will make you pay only on important things. It takes a few days to transfer the amount to the checking account before you are allowed to spend because of this; you will tend to use your rational brain on spending as the transaction happens in the future.
  2.  Use a budget plan: Budgeting allows you to organize and have control of your spending. Further, budgeting lets you decide on how you spend your money, pay off debts, save a few cash, and plan your future as well. In a budget plan, categorize the expenses and be realistic about each category. In other words, don’t be overly generous or allocate more amount to any section. Also, setting aside money each month will be helpful for those yearly payments that arise when you least expect them. For example, if you spend $1200 on your annual property taxes, leave aside $100 per month so that you don’t get stuck with your property taxes, or any other bills.
  3.  Use a budget plan: Budgeting allows you to organize and have control of your spending. Further, budgeting lets you decide on how you spend your money, pay off debts, save a few cash, and plan your future as well. In a budget plan, categorize the expenses and be realistic about each category. In other words, don’t be overly generous or allocate more amount to any section. Also, setting aside money each month will be helpful for those yearly payments that arise when you least expect them. For example, if you spend $1200 on your annual property taxes, leave aside $100 per month so that you don’t get stuck with your property taxes, or any other bills.
  4. Investment policy statement: An investment policy statement will help you to identify your goals and create an investment plan to match your goals. Further, it also lets you decide how much risk you’re willing to take ahead of time. The benefit of using an investment policy statement is that it takes out the emotions from the decision making, allowing you to the risk you are willing to take in a rational mind. Then, when there is a market crash, you can refer to the investment policy statement to guide you.
  5. Take charge of your finances: You can try to lower your expenses in many ways. For instance, lower your utility bills by reducing the use of hot & cold air conditioners. You can keep the thermostat set at 78 degrees in the summer and 68 degrees in the winter to make sure you’re not overusing air conditioner, limit the shower times, replace old-fashioned lightbulbs with ultra-fluorescent bulbs. Lower the amount you spend on food by planning your meals based on the budget, go grocery shopping with a list of items already prepared and buy nothing more, pack lunch as often as possible and eliminate the use of soda and junk food. Try to pay less for transportation by using public transport, use a less expensive vehicle that fits your budget, and do your simple car repairs. Some more ways are to try to have fun for less like using the public library or swapping items with friends instead of buying them, spend time with the nature such as going for hikes, going to the park for picnics, enjoy the sunset without having to spend a lot to have fun. You can ask your friends to come over to spend the day for a backyard barbeque and have everyone bring something to throw on the grill. Some other ways you can reduce expenses are by looking good for less, spending less on clothing. For instance, you can eliminate the use of expensive cosmetics, minimize the use of dry cleaning and instead wash and iron your clothes, shop when you need to buy new clothes, shoes only and if you’ve got the time and also the skills you can make your clothes.

Numerous ways are there to money and enjoy your life to the fullest. It’s not about trying to be rich or piling up money but to enjoy your life to the fullest while you can. You’re never too late to start new.

LEAVE A REPLY

Please enter your comment!
Please enter your name here