7 Keys On How To Manage Money That Will Improve Your Finances
April 3, 2023
You don’t need a higher-paying job or inherit money from a billionaire relative to have a good financial life. Better money management is all it takes for most people to reduce spending, improve their ability to save and invest and achieve financial goals previously thought impossible.
Even if you feel like your personal finances are stuck in a dead end, there are several things you can do to improve your current situation. Here are 7 actions you can start with:
If you do not know what or where you spend your money each month, there is a high probability that you should review and improve your usage and consumption habits.
Better money management begins by being aware of expenses but also of income. That is why we invite you to download our free budget template so that you can keep a complete record and identify what adjustments you must make when distributing the money.
In addition, you can use apps created specifically to record your expenses, such as ‘MoneyTrack,’ in order to see how much you spend on non-essential goods and services, such as entertainment, recreation, dinners, or even that daily treat. Once you identify those habits, you can create a plan to improve what is wrong.
If most of your purchases and payments are with your savings, current, or credit card account, you can also review your movements and see the statistics that banking applications give you to establish what percentage of the money you use in the different categories established there (market, restaurant, bills, etc.). While most of them don’t contain 100% accurate information, that data can give you a big picture of how you spread out your spending month-to-month.
Based on your net income for the month and your essential monthly spending habits, only then can you establish a budget that you can fully meet and maintain.
It is useless to create a budget where dinners or restaurant meals are eliminated when the normal thing is that you order them at home 4 times a week. As we have told you before, personal finances are more personal than financial, so create a budget that suits your lifestyle and spending habits.
Ideally, you should see the budget as a way to motivate yourself to improve your consumption habits, such as cooking at home more frequently, but at the same time, you must give yourself a dose of reality so as not to fail in the attempt to comply, since it is the only way this method works.
It is time to prepare for the unforeseen events that may arise and affect your pocket, so one of your priorities should be to create your emergency fund. It doesn’t matter if you start contributing little money each month. The idea is that you can create the financial cushion you need in case of unexpected situations that could destabilize your financial life.
Ideally, your emergency fund can cover up to 4 months of spending in case you lose your job, for example. But you can use it for situations like repairing your car, buying an essential appliance that stopped working or covering some important medical expense.
Being a person who pays your bills is an easy and wise way to manage your money since by doing so, you gain great benefits, such as building a good credit history, but above all, you avoid spending more on late fees.
Remember that a good credit score opens the doors of financial institutions because when you pay on time and meet your responsibilities, however minimal, such as keeping up with your cell phone plan, you are earning the confidence of those institutions.
Are you subscribed to streaming services that you didn’t even remember? Do you have a membership in a club or store that you no longer go to? Do you pay for the gym month by month, promising to go but never doing it? We know it’s easy to forget about those subscriptions that you stopped using some time ago but that you still have active and continue to be charged automatically from your bank account.
Therefore, it is time to say goodbye to what you stopped using, and that continues to represent an expense for you. You need to think hard and reconsider if it’s worth continuing to pay for something you don’t use.
There are large and important purchases that undoubtedly require a loan and that debt is within what we could consider financially healthy, like the acquisition of your own home or the facilities of your business. However, there are other purchases that, no matter how large they may be, should not be made through credit but through savings.
Purchasing a car on credit can result in expensive debt with high-interest rates, which can compromise your cash flow for years to come. In some cases, this debt may even prevent you from making future investments or purchases. However, there are options available to help manage debt, such as debt negotiation services. By saving money and paying off part of the vehicle cost upfront, you can avoid accumulating such high levels of debt and potentially get out of debt faster with the help of these services.
Even if your ability to invest is limited, small contributions can help you make your money really work for you.
Remember that at Tributi, we have the Savings, Investment and Stock Trading for Beginners and you can do it completely free through our 100% scholarships. Dare to learn and build habits that improve your financial life with stock trading course.
Changing our own habits is the best way to take our personal finances to a new level. Some are easier to change than others, but if you commit to this transformation, you will gain great skill in managing your money and getting the most out of it for a lifetime.