The Best Ways to Manage your Money Properly
This post is about the 5 best ways to manage your money properly.
Whether we are in a boom economy or in a recession, it is vital to get on top of your finances and remain disciplined.
We live in a culture of living for today, and not preparing ourselves for tomorrow.
Whilst this may be good for some aspects for our life, I can assure you when it comes to our bank accounts it is NOT the right approach.
Your bank account does not lie my friend, and it can be dreadful when you are crippled with debt, or worse have no idea how much money you actually earn or have.
And before you start questioning me and accusing me of being a frugal old cheap miser.
I have a confession to make…
I was like these people.
I lived for today.
I had no idea what I had in my account.
I spent beyond my means.
I chased the luxury lifestyle and items.
I paid for things I could not afford.
I was a fool with my money.
And as the saying goes “a fool with his money are soon parted.”
Meaning that if you carry on acting foolishly with your money you will lose it all.
I cannot emphasize how useless I was with my money; however, you can use me as your motivation to realize that you can turn yourself around for the better!
You can get on top of your finances by following the steps I will outline for you.
I swear to you, it is easier than you think.
All I ask from you is the following:
To be open minded
To be sensible
To be mature
To be patient
None of these tips to manage your money properly will work if you are not any of the things I just listed.
Because not only are we applying practical tips to get you to manage your money better, but we are also adjusting your mindset too.
Here are the 5 best ways to manage your money properly:
#1 – Create a Budget
The very first step in managing your finances properly like an adult is to create a budget.
A budget is an estimate of income and expenditure for a set period.
If you earn $2000 a month, how can you work out what to spend your money on without running out of it completely?
Easy, create a budget.
This is the reason behind doing so.
I strongly suggest you either use a pad of paper or an excel spreadsheet and have a calculator handy too.
Here are some further steps to creating your budget:
- Note your net income
The very first step in making a budget is to identify the amount of money you have coming in total.
Whether you have a full-time job or a series of side hustles, total it all up.
If your salary changes month to month, total it up by the year and divide it by 12 so you have a good monthly average to work with.
- Calculate Expenses
The next step is to total up all your total expenses in a month.
You need to begin with your essential expenses, your bills, rent, mortgage, your insurance, and food.
All unnecessary expenditure such as restaurants, gym memberships, and so on must go in a separate category.
It is easier to work with two categories with expenses such as “necessary,” and “unnecessary.”
- Track Your Spending
Most people do not have the slightest idea what they are paying for daily.
In fact, 75% of people in the united states alone are paying for subscriptions to products or services they have not used in months!
So, track your spending so you can get on top of what is coming out of your bank account every month, and adjust accordingly.
- Create Financial Goals
By now you should have a rough idea of what is going on in your bank account with income and expenditure it is time for you to start creating a goal.
Make long term goals and short-term goals, for example:
Short term goals can include saving for 6 months to pay off some credit card debt.
Long term goals can be saving enough to put down a deposit on some real estate.
#2 – Remove Unnecessary Expenses
It is time for you to either cut down or completely remove some of the unnecessary expenses coming out of your bank account so you can budget better.
Here is an example of some unnecessary expenses:
Credit card interest payments
Uber or Lyft
Your cable bills
Cigarettes and e-cigarettes
Takeout and delivery meals
Movies and Theatres
You may not want to hear this, but you can do without all or most of these in your life.
Chances are you are blowing money on takeout every week without learning to cook, or eat within your means could end up saving you hundreds or thousands every year!
Remember what I said, we are trying to be a bit more mature about this.
If you cannot afford it, why pay for it?
I am not saying NEVER go out to eat!
I am simply suggesting for you to start managing your money better.
What this will do in the long run will encourage you to be more disciplined with your finances and be a bit more careful.
You can be extravagant, but the wisest and most financially successful people are careful with their money.
#3 – Create an Emergency Fund
My father taught me one of the most valuable lessons about finances when I was so irresponsible with my money:
“Save 90 days’ worth of expenditure at all times, that way you are always on top of your finances.”
Some people preach to have six months’ worth of expenses.
Some even say have a years’ worth!
But for me, I have found having 90 days at all time helps me to keep on top of money, but it also provides me the added mental clarity that I am not living beyond my means.
As well as this, you need to also create an emergency fund.
There are many important reasons why you should create an emergency fund:
- Job Loss
- Your Business has folded
- You only have one income
- A tax bill you forgot about is due
- Medical or dental bills
- Emergency pet care
- Emergency house repairs
- Emergency rental property repairs
- Emergency car repairs
- Unanticipated travel expenses
- Therapy or rehab
- Saving for a goal
Life happens sadly whether you like it or not.
But if you are not prepared for the inevitable curve balls life will throw your way you are setting yourself up for unbelievable disaster.
This fund is what is usually referred to in TV and movies as a “rainy day fund.”
You can either decide how much you want to put in there, OR you can keep topping it up on a weekly or monthly basis.
Under no circumstances must you tap into this money for non-emergencies!
This money is not for your vacation, that expensive watch, or that cool new car.
Not at all!
This money is there to save you if need be when god forbid one of these emergencies occur in your life.
This will require a huge amount of self-control, maturity, and discipline on your behalf.
You can do this!
But also, by having an emergency fund as mentioned early will give you peace of mind, less stress and so much more positivity towards your financial situation.
#4 – Negotiate your Bills Down
Just last month my home insurance was way too high, and I had been with that company for almost 5 years.
So, I called them to complain to which they told me “there was nothing they could do.”
Therefore, I took it beyond myself to shop around for better offers across the web.
And when I found something better and informed them, I was leaving their policy they gave me an incredible 30% plus extra perks.
My point here is you should negotiate all your bills down.
Most people do not know what the average cost is for most bills, and through laziness and lack of confidence they accept whatever figure is given to them.
This is not the right approach to managing your money.
You need to start realizing that these companies will be happy with you paying as much as possible and they will certainly not inform you that you are.
So, get on the phone or email them asking for a better rate, on all your bills.
Even if you only decrease it by a small percentage you will STILL be BETTER off than you are currently.
You can do this = negotiate all your bills down ASAP!
#5 – Track Your Money Daily
Now you have created a budget, removed unnecessary expenses, created an emergency fund, and negotiated your bills down, you are only left with management of your money regularly.
What I mean is thanks to internet and telephone banking you can check your balance within in minutes, including any transactions too.
It is important to stay on top of this in case anybody hacks your account which happens more often than you would imagine.
But with your smart phone or tablet, you need to be tracking everything you are doing.
From that coffee at Starbucks to that grocery shopping bill.
Track your spending and money all the time!
Do not ignore it.
There are plenty of mobile apps for you to do this with, but if you are little old fashioned like me, take some time every week to write down what you have spent this week.
For me I cut out Starbucks coffee because I found out that I was in fact over $200 better off every month!
And I love me a Starbucks coffee!
So, please stay on top of your finances and enjoy being more responsible with your money!