Do you control your money, or is it controlling you? Managing money can be difficult for many reasons. While there is no shortage of advice available to you, it can feel overwhelming when you are deciding when and how to start making smarter financial decisions. You might also feel confused about how to turn long-term strategies into daily habits.
What is Money Management?
Money management is sometimes used interchangeably with the term, budgeting. Quite simply, it is a way to visualize how your money is being spent and how it will be used in the future. Any amount of money after all outstanding bills have been paid is a surplus, and quite literally, money in your pocket. When you extend yourself beyond your means, you enter into a liability, or debt. Money management controls the inflow and outflow in your budget.
Daily Money Management Tips
How do we start controlling our money? By starting today. In order to reach your long-range financial goals, there are small but significant money principles you can apply now. Here are a few strategies to help you with daily money management and make you feel more in control of your financial future:
- Keep track - Record everything you spend for one month to see where your money is going. There are a variety of software programs or free websites that can help you budget. Knowing where you spend your money, and what you spend it on, is a critical step in budgeting.
- Make a budget - Set and follow a monthly budget. Factor in big expenditures, like insurance, as well as everyday expenses, such as gas and groceries. If you pay a larger bill once a year, divide the total amount by twelve. This allows you to budget monthly for the annual bill. It requires discipline to manage your money strategically, but it’s worth the peace of mind knowing the money will be there when it’s time to pay the bill.
- Pay bills on time - Know when bills are due by keeping a bill calendar. Avoiding late fees is an easy way to keep money in your pocket. If you are likely to forget, you can set up a direct payment from your bank account.
- Check bank statements - Avoidance is not the answer when it comes to your bank statement, so be aware of your balance. Checking regularly keeps you informed of what you have and helps you feel more in control of your finances and future.
- Change small habits - Look for small ways to cut out any daily expenditure. Are you grabbing a coffee before work? Make your own at home. Hitting the vending machine for your mid-afternoon slump? Bring an energy-boosting snack from home. Simple changes like these are almost like making money.
- Save first - People often plan to save, but they might think about it too late. It’s important to establish an emergency savings. Pay yourself first by setting aside money in savings. This challenges you to spend strategically with what you have left.
- Reward yourself - Thinking of a vacation or a special reward may act as an incentive and useful motivator to keep saving and reduce spending. Focus on what you can do with the money you save rather than what you can’t do.
- Know Your Weaknesses - There are triggers for everyone when it comes to overspending. Does the end of a stressful day often find you at the mall? How about online shopping during a sleepless night? Knowing where you are most likely to trip up and avoiding those scenarios is key to minimizing overspending.
- Set short-term goals - Tackling debt, paying off student loans, or saving for retirement can seem overwhelming to many people. Instead, focus on some shorter-term goals that work toward those larger financial goals. For example, if you have a $10,000 student loan, focus on saving $1,000 and applying it to that debt. Achieving smaller goals gives you the positive energy and momentum you need to make big dreams seem attainable.
- Identify emotions - Just because you might make a poor financial choice today does not make you a failure. Guilt is not a helpful emotion. Focus on what you can change, rather than beating yourself up for past financial mistakes. Recognizing unhealthy and negative emotions will help keep your goals in focus and your mind in the right perspective.
- Give - Perhaps, the greatest money managing strategy is to give some of it away to a non-profit organization or charity of your choice. Consider doing something meaningful and lasting with a portion of your income. Not only will you feel good, it allows your money to work for many more people than just yourself and family.
Applying these simple money-managing tools really does add up to significant change. While money may not buy happiness, using it wisely does alleviate unnecessary strain and stress.