Bad money management. It is bad as it sounds and nobody wants to do nothing with it. However, a good percent of American people do not manage their money properly. Some studies have shown that American people are overall pretty bad when it comes to personal financing when compared to other countries. You may find yourself amongst these people with bad money management, but do not worry, there are many ways to get better in financing. We are here to guide you and find out which strategy is best to manage your money.
According to finance expert, Saij Elle, having a good money management plan can be the light at the end of the tunnel for people who want to get their finances in order. If you have an IRA, several bank accounts and credit cards, then you probably often feel like understanding your personal finance status might seem like an impossible task.
But if you do not take the proper steps to learn about the ways to manage your finances and get organized, you will feel like it really the task is impossible. It takes time to understand and to improve in managing your money. This is why we are here to show you the most important steps to manage your money.
1. Create a budget
The first step to managing your money is making a budget if you have not already. This is probably the most important step. Creating a strict budget and sticking to it may prove a bit difficult, but it will pay off in the end. Budgets help to see your financial situation with full transparency. It is the first thing that will help you pay off your debt and start saving for future priority expenses such as mortgage, car, retirement, and college fund. It is what will bring a balance to your financial status. To do this, you must first understand your income and your expenses so you can manage your money properly.
2. Understanding your expenses
Ask anyone to tell you how much they spend every month and they probably will not be able to tell you. This is not a rare occurrence. A lot of people do not know their monthly expenses. This is a problem if you want to manage your money, but there is an easy way to fix this. For one month start keeping track of all your expenses. That’s it. Understanding your expenses will help you see the whole picture and help you manage your expenses in the future. If you want to learn more about personal finance and success stories about people struggling with financial problems, then check out Financial Task Force.
3. Understanding your income
The difference between expenses and income is that most people know their monthly income, but have no idea about their monthly expenses. The whole point to this is to figure out your total monthly expenses and subtract that number from your total monthly income. If you get a negative number, that means you have spent more than you are making then take action and reduce your spending and expenses until you reach a positive number or at least zero. If you end with a positive number (which is good), then it means that you spend less than you are making. You can use this to increase your savings or debt payments. Once you understand the situation of your expenses and income in your life, you will have a much easier time managing your money.