Do you think you are bad with money? Many people who struggle with money aren't aware that their financial skills need some work. They just wonder where all their money goes each month and why they seem unable to save. If you're more self-aware, you might realize that you need to be better at money management. However, knowing that you need to be better with money and doing it are two different things. Fortunately, it's not too difficult to become good with money. You need to start with developing a few money management habits. From there, you'll develop a better understanding of money and how you can make the most of it.
Find a Reasons to Be Good with Money
So, you don't want to be bad with money any longer. But why? What are your reasons for wanting to be better at managing your money? You could have a number of short-term or long-term goals that will help to motivate you. Finding a reason to change your ways will make it easier to stick to your guns and form new habits. Perhaps you simply want to manage your disposable income better or have more of it. You might want to escape debt, or at least feel like you're not drowning under it. Maybe you want to set some saving and investment goals. You want to save for a new computer, or you're thinking about buying a house. Perhaps you're even thinking about your retirement. Find your motivation to help you get going.
Start with a Budget
If you want to be good with money, you need to begin with the basics. Monthly budgeting is essential if you want to ensure you spend your money wisely. However, don't just think about your month-to-month spending. Not all your expenses occur every month, and you could end up miscalculating. It's a good idea to also work out your expenses for quarterly and yearly periods. For example, you might receive your energy bill on a quarterly basis. It might be different in summer and winter. It's important to work out the cost based on your bills across the year and not your cheapest one.
To begin your budget, take a look at your current spending and write it all down. You can find plenty of spreadsheets to download with templates for tracking your spending. If you're not sure where a lot of your disposable income is going, spend a month or two tracking every penny. You'll soon see if you're spending $50 a month on coffee or unnecessary snacks. Once you know what you're spending and where it's going, you can start to make changes.
Adjust Your Budget
Now that you know how much you currently spend, you can find ways to save. In some cases, this means checking how much you can save through deals and negotiation. For example, you might swap your energy plan or provider to save more. However, sometimes it's up to you to choose your limits. If you currently spend X amount on food, can you set yourself a goal to reduce it to Y amount? Try experimenting with how much you're able to cut your expenses. Don't remove all pleasures from your life but find out where you're spending too much.
If you want to be better with money, you need to learn how to recognize ways to save. There are many ways you can spot great deals and methods for cutting your expenses. For example, comparing products and services before buying will help you find the best deal. Even if you have already purchased something, there could still be a chance to switch and save. There are also simple rules you can follow that may not occur to you. For example, when you buy your groceries, what is your method? Do you turn up at the store without a shopping list? Maybe you buy branded items and fall for all the special offers on things you don't need? You need to learn how you can reduce your spending by changing your thinking.
Think About the Future
If you want to be good with money, you can't just think about it in the short-term. You also need to think about the future, although how far into the future you're looking might differ. If you want to clear your debts, you could be concentrating on the next few months or couple of years. However, if you're feeling more financially stable, you could be planning to buy a house or thinking about retirement. When you're thinking about the future, try to focus on positives rather than worry. Think about how good it will feel to be debt-free or to save money for a down payment on a house. You need to create a balance between your wishes for now and what you want in the future.
Change How You Think About Money
Adjusting your thinking when it comes to money is a vital part of managing it better. Perhaps currently you only think about money when you're worrying about it. Or maybe you don't give much thought to your money at all. Instead, you spend it as you like and only think about it when you don't have much left. You might need to start placing more importance on money. Or perhaps you need to stop it being a huge stressor in your life. A change in perspective can help you change your ways.
Start Off Small
If you're trying to get your finances in order, you might have come up with some big ideas. You have an image in your head of being wealthy. You'll have comfortable retirement savings and never need to work again. But if you want to change your habits with money successfully, you need to think smaller, to begin with. If you come up with grand schemes, you'll feel disappointed when you feel like you aren't getting anywhere. As with anything else in your life, you need more achievable goals that will help you work toward a larger one.
Learn to Understand Money Better
Basic budgeting isn't hard to do. Once you understand the principle of it, you can start to reduce your expenses and save more money. However, there are many other things that are more difficult to understand. You need to be able to get your head around a few financial ideas to help you manage your money better. For example, you can learn to understand the rate of inflation. It can help you to realize the importance of saving or investing your money instead of letting it sit in a checking account. When it comes to financial product, you need to know key terms that will help you make the best choice. If you want to start making investments, you'll have a lot to learn about how to make the best decisions. You can sometimes get help from financial advisers. However, you should try to do some reading too so that you can teach yourself what you need to know.
Make Saving a Priority
When you try to save, do you look at your savings as whatever you have left at the end of the month? If you're budgeting your money properly, you shouldn't need to do this. You know exactly how much you need to spend on your essentials, or at least have a fairly good idea. So you should know how much you have left over for savings and disposable income. Don't look at it as one sum, and whatever you don't spend on nice extras goes into your savings. Instead, give yourself a set amount to spend and save. Put your savings into a savings account when you get paid, so you're not tempted to spend it.
Have you ever had a friend who tells you they can't afford to go out, even though you're sure they have money? It's not that they don't have the money. It's that they're budgeting wisely, and their money already has a purpose. They've allocated it to their expenses or their savings or investments. They've spent their “fun” money for the month and are disciplined enough not to spend any more. This is the attitude you should aim for if you want to be good with money. You don't have to avoid all spending on things you enjoy. But you should make sure you put aside your savings before you start spending.
Keep Track of Your Financial Health
If you want to be better at money management, make sure you're always on top of your finances. Don't set a budget and then just assume that you're following it. You should be checking your bank statements and keeping track of your spending. Review the money that goes out of your account each month to ensure it's all correct. You should also check your credit score. Remember that you can get three free credit checks a year. Make sure you're aware of any changes to your expenses too. Has your energy provider raised its prices or your bank changed its fees?
No one becomes good with money automatically. You have to develop healthy habits if you want to manage your money better.