For any person with money, money management is important. The good news is that money management does not need to be difficult or complicated. In order to manage your money successfully, you need to have a plan that you constantly review. Here are some key points to consider when it comes to money management.
- List Your Debts – Make sure you are fully aware of all of your debts – short term and long term. Understanding where your money is going and how much you are repaying each money in capital and interest payments for each debt is an important first step of managing your debt and your finances.
- Get Out of Debt – It is important to get out of debt and stay out. This is particularly true of credit card debt. Credit card companies charge high fees and high interest rates making it very difficult to get out of credit card debt once you have got there in the first place. One way to help is to make sure not to use your credit card for any item that is not necessary. Pay for discretionary items with cash to avoid overspending on them.
- Invest in Income-Producing Assets – Start by making a list of your assets. Make sure that whenever you have spare income, you invest in assets that produce income. If you invest in assets such as clothes your wealth cannot grow.
- Create a Financial Plan – In order to be able to manage your money you need to be clear on what your short term and long term financial goals are. Prioritize your goals into necessities and discretionary spending and then priorities these into their level of importance to you.
- Create a Budget – You need to work out your income and your expenses. Include everything. In income include your paycheck, babysitting money or social security Your expenses are more difficult and must include everything from rent, utilities, phone and gas to coffee from the machine and work and chocolate from the checkout.
- Balance Your Budget – If your expenses are higher than your income you need to cut back on the expenses. Start with the lowest priority item and work your way up.
- Managing the Budget – You can manage your money easily if you have followed the above steps. Simply review the steps every now and then to check you are staying on track.