Manage your Money with These 7 Easy Tips -

How to manage your money should be a mandatory course in high school. Money management is a skill that everybody needs regardless of what line of work you are in or how much money you earn.

The good news is that it is never too late to learn how to manage your money and the sooner you dig in and start organizing your finances, the sooner your money situation will improve. So, if you fall into the category of not knowing what the heck you are doing or you are somewhat familiar with but just want to tighten up your system, read below for a few tips.

Money Management Tips

1. Define your goals

Defining your goals before jumping into a money management strategy helps you focus on what is important to you. Take some time to address what you want to achieve. Are your goals to reduce debt, increase savings, invest money, feel more financially organized, or a combination of all of the above? You will have more motivation and inspiration when you know what it is you want.

2. Understand your current financial situation

Taking inventory of your current situation gives you incite as to what needs adjusting for your money management plan.

Answer the following questions honestly. Your responses will give you a good idea of where you need to focus.

Are you living paycheck to paycheck?
Do you earn irregular income?
How much debt do you have?
What is your savings situation?
Have you ever created a budget?
What are your spending habits?
How do you feel about money?
Do you know your debt-to-income ratio?
Are you tracking your income and expenses?
How often do you review your bank statements?
Are you investing money?
Do you pay your bills on time?

3. Budget

Budgeting is planning how you will spend your income. It includes your savings and investment contributions, extra money toward debt payoffs, and your standard bills.

Creating a monthly budget is proactive money management. You are deciding what percentage of your income is allocated to each of your budget categories. You choose the budget categories based on your lifestyle, values, and goals.

When you create a budget you are managing your money.

4. Create a schedule to manage your money

Creating a regular schedule to review your finances and pay your bills is a great way to manage your money. If you work through an online calendar set up a recurring event to spend time doing this.

The frequency depends on you. I like twice per month. The first week of every month I reconcile my bank statements, create my monthly budget and set up some bill payments that are due in the coming few weeks. I have another review mid-month in which I review my budget progress, set up more bill payments for the remainder of the month, and check in on the status of my financial goals.

5. Pay attention to your spending

To effectively manage your money, pay attention to your spending. An effective manager at any company monitors their department. You are your money manager. Take the role seriously and manage your spending.

Creating budgets is great but you need to also follow the budgets. Check on yourself. If you are overspending, then find out why and fix it.

Are you an emotional spender? Do you spend when you are bored, sad, or happy? Is there something that you can replace spending with when these emotions pop up? Maybe try exercising, being in nature, doing a hobby, reading, or spiritual work.

Is your budget unreasonable? Maybe your budget looks great on paper but in reality, it is just not possible. It is ok to adjust it. Make the goals a little easier to achieve and then stretch them out over time. Small achievements are motivating. Just be sure not to make them too easy or you will just be maintaining your current state.

6. Tools for how to manage your money

You do not need to be a math wizard to understand the basics of money. There are only a few tools that you need to keep track of your financial health. If you implement them into your routine you will be miles ahead of where you most likely currently are.

A few tools are below:

Track your income and expense: For those who use a check register, that is what this is for. If you do not use a check register, I suggest starting using one. There are online options available if you prefer online to manually write everything down. Tracking your income and expenses shows your current available balance (so you do not overdraw) as well as a great picture of your spending habits and budget progress.

Reconcile your bank statements: This is also known as balancing your checkbook. A monthly reconciliation keeps you up to date on your current financial status as well as ensures there are no mistakes, whether it be by the bank or yourself.

Determine your net worth: If you sold all of your assets and paid off all of your debts (liabilities) you would be left with either a positive or negative number.

This s your net worth, which is how much you are worth financially. Ideally, this number is positive. Keeping track of your net worth is a great way to monitor your financial health. It is also a great tool to use for budgeting or if you are contemplating buying something expensive. How will that purchase affect your net worth?

Determine your debt-to income ratio: Debt to income ratio is mainly used by lenders. However, it is another tool that indicates the health of your financial situation. The debt-to-income ratio is the percentage of your gross income that is spent on debts each month. The lower the percentage, the better financial health you are in. Keeping track of this is helpful if you are preparing for a large purchase such as a home. It is also a useful tool when monitoring your debt payoff goal.

7. Financial organization

Have an organized system for your finances. This includes maintaining financial files and schedules. Your system does not need to be elaborate. Although if that works better for you, then by all means set it up that way. I use a very simple, but effective system that does not take much time to maintain. It works better for me. Try different systems to see what works for you. An effective system is one that you stick with and gets the job done.

Summary of how to manage your money

Managing your money is very similar to managing just about anything else. Once you know what it is that you want and understand where you currently are you can create a plan that works for you. Follow up by reviewing regularly and adjusting when necessary.

Remind yourself often that you are the manager. You are the only one who will effectively manage your money and you can do this.

Manage your Money with These 7 Easy Tips