Money management includes budgeting, banking and saving, investing, spending, paying taxes, managing debt, retirement planning.
Money management skills will make your life snug. Money management plays a vital role in achieving the financial goals of an individual or organization. It is very tough to deal with financial crisis without proper money management. This will show you the way to spend in line with your income.
14 Money Management Tips to Manage Your Money
In order to manage money properly, you must first set financial goals. Then you need to make a budget to reach that goal. Then go the next step.
1. Set financial goals
To manage money, you must first set financial goals. Financial goals are objectives or milestones through which savings, investment or spending targets are met within a certain period of time.
Whether it’s starting an Emergency fund, pay off debt, save for retirement or investing in stocks, financial goal needs to be clear and definite.
Financial goals will make your life easier. This will help you to reduce your extra expenses. You can develop a saving mentality.
Financial goals can be short term, midterm and long term. Short term goals are 1 to 2 years, midterm goals are 2 to 5 years, and long term goals are 5+ years.
- Short term financial goals include:
- Save money for vacations
- Get out of debt
- Home Remodeling & Renovation
- Building an emergency fund
Mid-term financial goals include:
- Saving for a car down payment
- Save money for a house down payment
Long term financial goals include:
- Savings for retirement
- Paying off a mortgage
2. Create a budget
Budget is a plan of revenue and expenditure over a period of time. Budget is a very important catalyst for money management. Budget will aid you spend according to income.
Many people do not like to create a budget and live according to it. That is why they cannot spend according to their income. Many of them suffer from financial crisis. But it is seen that those who make budget and spend accordingly do not face financial crisis. They can save some money even after spending.
To create a budget, you first need to figure out how much you earn. Once you have determined your revenue, you have to identify the areas of expenditure. Then you need to make plan to adjust your revenue and expenses. After creating a budget, you should review this regularly.
3. Track your spending
Tracking your spending is a approach to take control of your money.
This allows you to keep an eye on where you are spending money and how you are doing it. You can find out if you spend extra somewhere and you can control it without a hitch.
The funny thing is that most people don’t keep track of how much they spend each month. Many people do not like to keep track of expenses. Many people have no idea how to keep track of expenses.
You can track your spending through various ways:
- To track your expenses you can create a ledger and put all of your expenses data on it.
- Keep all types of receipts (groceries, restaurant bills, utilities, etc.).
- Check the bank statement.
4. Learn how to save
If you want to manage your money properly you must know how to save money. If you can’t save money by cutting costs, you won’t get out of the financial crisis easily.
There are several ways you can save money. Sometimes we spend a bunch of money unnecessarily. Like going to restaurants and eating a lot, we use the car instead of walking despite having an office near the house. We can save some cash by reducing these costs if we are a little aware.
We buy different kinds of necessities every day. Now if you buy one or two of them then you have to spend more money. But if you buy a lot of products at once, you will get some discount.
5. Start a side-hustle
Side-Hustle can diversify your investment portfolio. It will assist you to make some extra cash.
When a person tries to make extra cash by doing other tasks besides your day job, it is called side-hustle. Side hustle is a great opportunity to make an extra $1000 a month.
As a side hustle you can do anything, but you should start a side hustle you enjoy doing.
Suppose you are a good writer. Then you can create a blog. You can earn some extra money by blogging in your spare time.
You can make a decent amount by doing a freelancing job. At present many people are earning through freelancing.
If you like making videos, you can make money by creating a YouTube channel.
You can also earn money by doing online surveys. But in this case you have to find the best survey sites from where you can make a reasonable income.
There are many apps that will give you real money. You can also drive Uber or Lyft in your spare time.
6. Get out of debt
Don’t take out a loan if you have financial solvency. And if you take a loan, try to get out of the debt trap by repaying the loan regularly. Pay off small debts quickly and then moving onto your next biggest debt.
Interest rates on credit card loans are much higher so try to stay away from credit card loans.
Before taking a loan, you must know the loan requirements. And you need to get advice from experts on how to manage debt.
7. Evaluating and understanding your income
Those who do office jobs make a certain amount of money every month. Again, those who do business make an indefinite amount every month. In some months they earn more and in some months they earn less. We need to analyze whether the amount we are earning per month is enough to cover all our expenses per month.
After deducting all the expenses, we have to find out how much of the income is left over. If we have extra money, we need to decide where to invest that money.
It is also profitable to invest extra money in stocks. But we all know that investing in the stock market is risky enough. So before investing in stocks you must have a good idea about the stock market.
And if you see that your expenses are more than your income, then you have to track down in which sectors there is an opportunity to reduce expenses.
8. Create an emergency fund
The emergency fund will help you get out of a sudden financial crisis. Emergency fund may be required due to job loss, medical bill, car breakdown, home-appliance repair or replacement etc. If you want to deal with difficult situations in the future, you have to put some money in this fund.
Most experts recommend keeping the three to six months of your expenses in the emergency fund. However, situations may arise when more money is needed. Again many experts say if your job is very secure then you can put less money in this fund.
First you can start an emergency fund with $1000. Then keep raising it slowly. $5,000 is a good amount to cover your most of the expenses.
9. Invest in assets
Do you want to invest in assets to increase income? If you want to invest, you should have an idea of where to invest. Because there are some assets in which investing is comparatively less risky. Again, there are some assets that are risky to invest in. Assets you can invest in –
- Certificates of deposit (CD’s)
- Real Estate Crowdfunding
- Real Estate Investment Trusts (REITs)
- Dividend yielding stocks
- Property rentals
- Peer-to-peer lending
- Private Equity Investing
- Creating your own product
- Rental Properties
- Savings Account
10. Manage your credit card spending
It is very easy to buy something with a credit card. Having a credit card can save you from the hassle of carrying cash. However, the downside of credit cards is the high interest rates. The interest rate on most credit cards is 20%-25%. So if you can’t reduce the use of credit cards, you can’t save money.
Try to keep the credit utilization ratio within 40%. For example, a $2,800 balance on a credit card with a $7,000 credit limit equates to a 40 percent credit utilization ratio.
A credit utilization ratio of more than 40% can have a negative effect on your credit score.
Try to pay credit card payments in full every month. If you can pay all the dues every month, you will be saved from costly interest charges. In this case you can follow two strategies, 1. Spend as much money as you can afford each month. 2. Set a monthly spending limit and security alert.
11. Loan management
Loan management is an important part of money management. If you want to manage money efficiently, you need to know about debt management.
We take out loans at different times to get rid of financial problems. There are several possible reasons for borrowing, such as – pay for school fees or medical expenses, buy a car, consolidate high-interest debt, home improvements, and fund a big purchase.
Before taking a loan, you need to have a thorough knowledge of principal, interest, APR, monthly payment, secured and unsecured loan etc. Because if you don’t have a good idea about these terms, you may face a loss.
Suppose you take a loan at 2% interest, but if you have no idea about the principal, you will not be able to find out the interest amount on the loan. You can’t figure out how much to pay each month. As a result, you may be at risk while paying off your monthly payment.
12. Plan for Retirement
Everybody should have a retirement plan. Retirement plan includes saving, investment and allocation of money to lead a decent life during retirement.
Some retirement plans to consider in 2021:
- 401(k) plans
- Solo 401(k)
- 403(b) plans
- 457(b) plans
- Traditional IRA
- Roth IRA
- Self-directed IRA
- Spousal IRA
- Rollover IRA
- SIMPLE IRA
- SEP IRA
13. Use cash back apps
Cash back apps have changed the concept of shopping, brought a new trend. You can shop through these apps without going directly to any physical or online store.
You can save some money by shopping with cashback apps. When you shop from a online store of the retailer through a cashback link, you will be paid a percentage of the total cost as cash back.
Cashback apps are very easy to use. First you have to register by entering the app. Membership is free in most apps. You need to visit the app every time you want to purchase a product. Then visit the preferred and supported vendor store using link showed in the app and select the product. You will receive a cash back reward only when you complete the order and make payment.
Some Cashback apps:
- Capital One Shopping
- Fetch Rewards
- Receipt Hog
14. Review your credit report
Credit report is detailed report of a person’s credit history as well as certain other information that’s reported to credit bureaus by your lenders and creditors.
Credit scores range from 150 to 900. Scores from 580 to 699 are considered fair, 670 to 739 are considered good, and 740 to 799 are considered very good.
Credit reports play a vital role in obtaining personal loans, car loans, home loans or student loans. You can easily get a loan if you have a good credit report score. But if the score is bad, your chances of getting a loan will decrease.
How to manage my money? Many people often ask me this question. So today I wrote this article for them. So if they benefit from this article, my writing will be successful.
So let’s take another look at “14 tips to manage your money”.
- Set financial goals
- Create a budget
- Track your spending
- Learn how to save
- Start a Side-Hustle
- Get out of debt
- Evaluating and understanding your income
- Create an emergency fund
- Invest in assets
- Manage your Credit Card Spending
- Loan management
- Plan for Retirement
- Use cash back apps
- Review your credit report