9 Tips to Manage Your Money Wisely

For most people, financial issues do not arise from failure to raise enough money, but rather spending more cash than they can make. If you’re pretty bad at managing your finances or you simply need to control your funds and debts properly, read on to discover sound money management strategies.

Set Financial Goals 

Many people tend to use words rather than numbers when it comes to describing what they want to accomplish financially. Avoid falling in such groups and set specific financial goals. In addition to numbers, use dates to set these goals. 

Write these figures in a book or make an online record. Ultimately, you want to know how much you can spend, the amount to save, and by what specific date. Try as much as possible to stick to these numbers and dates; do not falter unless unavoidable circumstances force you to make certain changes.

Understand Your Income and Expenses

Ask anyone, including your friends and colleagues, off the top of their head how much they earn and spend every month, and you’ll find that they might not be able to do so. Don’t be surprised though; considering that you might also be sure of what you earn but clueless regarding your total expenses every month.

Fortunately, estimating your expenses is as easy as falling off a log. Simply take all the receipts of your groceries, utilities, restaurant bills, and check your bank statements to determine your total overheads. For enhanced accuracy, remember to keep track of everything you pay for, both in cash and credit cards. 

The idea here is to see the whole picture of your expenditures and determine how to manage them. Accounting for all your fixed and variable expenses will help you assess your historical performance over time. 

A positive number is a good sign and an indication that you spent less than what you earned. The recommended action in such a scenario involves increasing your savings or doubling your debt payment amounts. On the other hand, when the number is negative, you spent more than what you made.

Slash Your Expenses

From the above section, you will discover how much you spend every month. Remember that at the worst-case scenario, the totality of your earnings minus expenses should equal zero. If your expenditure equals or exceeds your income, you will want to reduce your overheads, especially those without which you can do.

 

For instance, you can try to use less power to reduce electricity bills at home by air-drying your clothes rather than using a tumble dryer. You can also use desiccant dehumidifiers instead of the electric ones when looking to remove excess moisture from your indoor atmosphere. Also, consider using LED lights rather than using regular lights that use so much electricity also try riding a bicycle or walking to work to save on gas. You can also price match your groceries and use coupons to save money.

Allocate a Portion of Your Income Towards Financial Progress and Priorities

You may be aware that priorities are crucial when making budgets and during the allocation of funds. In this case, priorities imply buying what is essential, saving for emergencies, paying off your debts, and padding up your retirement nest egg. While at it, ensure to choose the right percentage.

For example, if you get $15 per hour, you can allocate at least 25% of your income for such financial priorities. This percentage is not fixed and depends on what you earn. Play around with your income figures to get the right amount.

Budget for Lifestyle Spending

As mentioned above, certain things come first when budgeting for your income. But life would be incomplete and mundane if you only cover the necessities and ignore lifestyle spending. The good news is that you can save and splurge money simultaneously.

If you abide by the figures in the above section (allocate 25% to priorities), you are not badly off if you budget about 30% of your total income for your lifestyle spending. This generally revolves around fancy restaurants, movies, and happy hours. However, be sure to alter the figures as your income changes.

Consolidate All Your Debts

Debt is a dreaded word for everyone, but most people have arrears to pay, especially in the face of challenging economic times. Nonetheless, you shouldn’t get comfortable in debt; you need to manage your dues if you want to lead a peaceful life. The first step here involves getting the deficit under control before you even contemplate getting rid of it. 

Consolidate all your debts, including credit card debts and student loans, and try to get the lowest interest rates. Luckily, there is an array of options that allow you to combine a myriad of unsecured debts into one bill instead of paying them individually.

If you’re on a tight budget and only have a single credit card debt, be sure to settle the minimum amount as soon as you get the bill. Subsequently, if you come across more money before you get your next salary, make additional payments toward the same.

Save for Retirement

You may be far off your retirement age. However, if you want to be basking in the Miami beaches and enjoying your golden years to the fullest, you should start saving for retirement sooner than later. Work with numbers and ensure to establish a savings target. Put simply, how much should set aside for your retirement kitty?

Whatever you save should match the kind of lifestyle you envision. Saving about 10 to 15% of your income annually is an excellent idea.

Use a Personal Finance Tool or App

Times are changing, and so should you. Put away your old-school calculator and make your sophisticated financial account easier. Finance tools will effortlessly handle all the computational work, help you budget, and consolidate all your money in one place. Such devices can be found for free from various sources, including mobile apps and online.

Read and Learn Extensively

Knowledge is power, and learning never stops; the same rule applies to managing your finances. Read various widely online, watch financial gurus explaining their money management strategies, and ask for advice from financial consultants to stay well-informed about finances. However, you’ll want only to take the advice that applies to your financial position. With time, you’ll find that managing your money is a piece of cake. 

The Bottom Line

Being able to wisely and effectively manage your money will make your life easier. You will know how to set financial goals, how much to save for investments, emergencies, and retirement, and will not get yourself into unnecessary debts. It is a learning process that may take time to make everything run smoothly, but with time, you will get your money and debts under control.