3 Essential Money Management Tips
Learning effective money management tips can help your personal finances immensely. Everyone who makes money knows that it can leave your bank account just as fast as it comes in! The best part about these tips: they’re simple to do!
Tip # 1: What Are Your Sources of Monthly Income?
The first essential tip to money management is to know where you are getting money every month. This will be different for everyone, so get a sheet of paper and make a list. Make sure that every source or potential source is identified.
This article is written by Matt Smith who owns a blog, College Student Answers.
Any source of income that is consistent, measurable, and that adds to your bank account needs to be on the list. After you determine every source of income, add them up. This is your total monthly income.
This amount is what you have to work with every month and the baseline of effective money management.
Tip # 2: What Are Your Monthly Expenses?
The second money management tip is the other side of your personal financial story- your monthly expenses. You need a list of all your expenses that happen on a monthly basis.
To do this effectively, I recommend that you get a bank statement or a list of transactions for the last month. You can get both from a teller at your bank. Take a highlighter and highlight every monthly expense you have.
This list might include things like (just to name a few):
- mortgage/ rent payment
- car payment
- money spent eating out at restaurants (including fast food)
- day care
- credit card payment
After you identify each of your monthly expenses, group them into 2 categories: NEEDS & WANTS.
This is one of the money management tips that will take some honesty on your part. What might be important to someone else might not be important to you. Think about your personal priorities and honestly categorize your expenses.
Add up how much money you are spending in each category. Is it surprising? I know it was for me! I couldn’t believe how much money I was spending on fast food every month. This should open your eyes to the reality of your financial situation.
Tip # 3: Evaluate Income and Expenses Together
Bring both your income and expenses side by side. Total them up if you haven’t already. This is an overview of all your personal finances. How do they look? Which amount is higher, your income or your expenses?
If expenses are higher than income, then go back to your list of expenses and look at the WANT category. Which expenses can you cut? You need to get your expenses under control so that it isn’t higher than your income. This may require cutting things that you want, but don’t need.
If income is higher than expenses, then congratulations! You have extra cash each month. You can use this extra money to save for a rainy day, invest it into another money making account, or put towards another income source (like a home business or stock options).
Either way, you must evaluate your income and expenses in order to truly manage your money effectively. If you don’t know where your money is going every month, how can you manage it?
Make Money Work For You
These 3 money management tips can help anyone who uses them. This might be a painful process, or it might be a happy process. Either way, your end goal is to have more income than expenses so that you can get your money working for you.
If you have more income than expenses, you will have more options about what to do with your money. You will have less stress about paying bills and “getting by” each month.
Doing this is “easier said than done”, but it is doable. Change is never easy, but it can be very rewarding in the long run. Money can eventually work for you instead of you working for money if you will just put a little aside each month for investing.
This of course requires that your monthly income be higher than your monthly expenses. Get to where you want to be financially by using these effective money tips.
This article was written by Matt Smith, owner of College Student Answers blog.
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