What You Need to Know About Money Management

What You Need to Know About Money Management
  • Opening Intro -

    Tens of millions of Americans are weighed down by debt, with many people insolvent or bankrupt.

    Living within one's means is what points to good money management, a skill that anyone can acquire.

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Even if you have struggled with staying afloat for much of your life, there are certain fundamentals that you can begin to apply today in a bid to manage your money wisely.

1. Create an emergency fund. Before you do anything else, you need to set aside money for life’s emergencies. It is recommended that people have three to six months of their salary saved, but that amount is often out of reach for lower income people. Instead, begin to set aside money that you will tap only for emergencies, what you may have previously sought help with by accessing your credit cards.

2. Start saving. Even if you are able to save as little as $5 per week, that money soon becomes $260 after one year. Likely, you can set aside larger amounts, but if you are not in the habit of saving regularly, a small amount will get you started. If possible, have money automatically transferred from your paycheck to a savings account, funds that you won’t be tempted to spend.

3. Review your outgo. Your income must always be greater than what you spend, otherwise your outgo will plunge you further into debt. Quite easily you can find places where savings can be realized beginning with your insurance. That means bundling your homeowner and car insurance together under one account to realize savings. Combining utility services to one account such as the Internet, phone and television services can save you money too.

4. Put your credit cards on ice. Literally. If credit cards are your downfall, then put them on ice. Fill a metal bowl two-thirds of the way with water and place your credit cards in the bowl. Place the bowl in the freezer and allow to freeze through. Sure, you can get your cards out with some ice breaking on your part but the fundamental here is to make it hard for you to do so. Moreover, the cards won’t be in your wallet when you most likely will want to use them.

5. Establish a budget. You may need some help here, something your county extension service or local community college may provide. Essentially, your budget is comprised of two parts, your income and your various expenses. Your expenses can be further divided between fixed (rent, car payment, health insurance) and flexible (utilities, food, transportation) expenses. Your income minus your expenses should be zero or higher. Anything in the negative column means that you are losing money.

6. Just give it away. Making donations when you have little to give may seem impossible to do. However, even the smallest donation can have a positive impact on your next year’s tax return. And those donations do not have to be just cash — in-kind gifts including clothing, furniture, books and other material goods donated to an recognized IRS charity can benefit you too.

7. Keep track of everything. You should manage your finances wisely including balancing your checkbook regularly, keeping tabs on your monthly bank statements, understanding how much it will take to reduce your credit card balances and so forth. Keep your receipts and go over them monthly — you may discover that you’re spending money on little things that make a huge difference including your daily coffee at Starbucks, lunch out every day and choosing premium grade gasoline when regular will do.

Money Management Considerations

Managing your money right does not happen over night. You may need to seek assistance, something that a financial counselor can
provide. Knowledge is power and you can get empowered by understanding what you need to do to fight and win the money management battle.

See AlsoYour Personal Budget and How to Create One

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