3 Essentials for Managing Your Money
If budgeting and preparing expense sheets sound like tasks only an accountant would do, think again. Keeping track of your personal finances – even if you have an accountant – is a vital importance to your financial future. It not only gives you a keen awareness of your money situation, but also increases your chances of making smart spending and investment decisions.
Following these crucial tips will help you create a secure financial future for you and your family.
Spend Less Than You Earn
Although this tip sounds straightforward, you may sometimes find it daunting to actually put it into practice. However, reevaluating where you’re spending money can significantly increase the scope of your earnings and help you live within your means.
The best way to get started is to write out all of your monthly expenses and see how this compares to your monthly income. This important first step will help you determine the current state of your personal finances.
Take a second look at this list and see if you have any expenses that can be eliminated or reduced. Be honest with yourself. Which expenses show wasting your money on things that aren’t even important to you? Focus on keeping what’s important and eliminating the rest.
For example, while there’s nothing inherently wrong with spending five dollars per day on a Frappuccino or a glass of wine, if your income doesn’t support this kind of spending, it may be in your best interest to do without this small luxury for the time being. However, $5 can add up and making these into a once and awhile could be a way to enjoy it that much more while helping you to reallocate the money where it may be more needed.
Invest in a good budgeting program, like Quicken, QuickBooks, or a favorite, EveryDollar with Dave Ramsey to help you keep track of your spending and simplify the task. I personally use a spread sheet with Excel that keeps me on track with my bills and goals.
Make Your Money Work For You
This can be as simple as taking advantage of the compound interest offered by most savings accounts.
Making sound investments can help increase your annual income over 5%. You don't need to invest aggressively to get this kind of return, either. Ask friends and family for referrals to trustworthy brokers to help you get started.
Credit Unions are a great resource and having a savings account that isn’t attacked to your spending account can help you with the “out of sight, out of mind”. I still have access to my savings account at a different bank that I can check on to keep me motivated, but unless there is an emergency within an emergency, I don’t touch it- instead I just add to it.
Protect Your Money
Ensure that you have a plan to protect your assets in case something unforeseen happens. There’s nothing worse than working hard for your money and then losing it due to poor planning and shortsighted investments.
Sometimes, slow and steady not only wins the race with respect to your personal investing strategies, but it can also put your money at lower risk.
Beware of any instant growth opportunities or investment clubs that promise overnight fortunes. These may include seminars with “self-made millionaires” that pressure you into signing up with a program that might not be a legitimate source of income. Take the time to research investment opportunities before you commit your money to them. And be sure that you are in a financially secure place before taking that step. (Which includes being debt-free, having 6 months to a year of monthly costs in savings, a reliable home, transportation, and so on…)
Consider obtaining renter or homeowner insurance to help protect your assets.
Life insurance is great until you have financial stability to ensure that you don’t leave your loved ones with financial stress is something was to happen to you.
Knowing how to manage your money is a fundamental aspect of any successful long-term personal investment strategy.
If you take just a small amount of time to analyze your spending habits, you may surprise yourself with how much money you can actually save! You can then invest these savings in a way that will help you see returns year after year. And with most stress coming from financial situations, this gives you room to breath and enjoy the little things in life; it’s the little things that we don’t want to lose sight of as they are the reason why we work in the first place.
