Developing money management skills doesn’t have to be difficult or scary. You can make one small change and then make another change later when you feel comfortable with the first. It’s also never too late to learn how to manage your money. Even if you’re nearing retirement, there are some things you can do to make sure you are financially prepared.
The following are several money management tips that work. By making some simple changes, you can increase your savings, stretch your money, and be prepared for unexpected expenses.
Create a Budget
A budget is a simple money management tool to prevent overspending. It doesn’t have to be complicated, and you don’t need an elaborate spreadsheet to make it work. You can create a simple budget in a few minutes with a pen and paper.
To create a budget, write down all of your expenses. Then allocate portions of your monthly income to each expense. Don’t forget to put some of your income into a savings account. When you have spent all of the money you allocated for a particular expense in a month, wait until a new month begins to start spending again.
You’ll probably have to make adjustments to your budget in the first few months, so don’t worry if you go over it at first. It’s also okay to go over your budget if you truly need something.
Track Your Spending
Do you know where all of your money goes each month? Most people don’t. You may not give much thought to grabbing a quick take-out lunch or buying coffee while you are on the go, but little expenses can add up if you aren’t careful. Tracking your spending can help you identify areas where you are overspending.
Although it may sound like another thing to keep tabs on, tracking your spending is easy with expense tracker apps. Not only do these apps help you see where your money is going, they categorize your expenses so you can better understand your purchasing habits, enabling you to fine-tune them if need be!
Create an Emergency Fund
Sometimes emergencies happen. Maybe your car needs a repair, a pipe bursts in your basement, or you receive an unexpected medical bill. If you don’t have money saved for emergencies, you may have to pay for them with high-interest credit cards. If you can’t afford the payments on these cards and you’re late or miss payments, your credit score will be affected.
To create an emergency fund, you could open a separate savings account with your bank or credit union. Every time you get paid, you can then deposit a certain percentage of your paycheck into that savings account. Just remember that this account is for emergencies only so you shouldn’t dip into it to pay for your everyday expenses.
Save Up for Big Purchases
If there’s something expensive you want to buy, think about saving up to be able to pay in cash instead of using a high-interest credit card.
A benefit of saving up for big purchases is that it gives you time to think about whether or not you really need the item you want to buy. Many people, after saving for a few weeks or months, decide they don’t need the item as much as they thought they did. Money you don’t spend is money saved.
You may be able to save big by buying used items as much as possible. Buying used doesn’t mean you have to buy things that are in poor condition. People sell things all the time that they don’t need any longer but are in great condition. And they sell for a fraction of what it would cost to buy new.
You can easily find used items for sale in your community by checking Craigslist, Facebook Marketplace, and OfferUp, to name just a few.
In terms of cars, buying slightly used low-mileage vehicles is a great way to save a lot of money. A vehicle that is 2-3 years old will still have the majority of its useful life remaining, will still be under warranty, and can be thousands of dollars less than a new model.
Many people just accept the sticker price for whatever they buy. But you may be able to get a better deal just by asking. Many things are negotiable that you might not have considered. Just a few include:
- Medical bills
- Vehicle repairs
- Cable bill
- Insurance rates
- Credit card fees
- Professional services
It’s also important to negotiate anytime you’re buying something used. Sellers often price used items a little higher with the expectation that the buyer will try to negotiate down the price.
Contribute to a Retirement Account
Retirement comes sooner than you think. Even if you’re just starting out in life, the sooner you start investing for the future, the more you’ll have in your pocket when you reach your golden years.
An individual retirement account (IRA) and a 401(k) are the most common types of retirement accounts. An IRA is an account that you set up yourself, while a 401(k) is an account that’s managed by employers.
An important benefit of a 401(k) to consider is that many employers will match your contributions up to a certain amount each year. This is free money you can take advantage of to grow your retirement savings quickly.
Take Control of Your Financial Future
Knowledge is power when it comes to managing your money. Implementing a few simple strategies can result in big savings to help you keep more of your hard-earned money. It can also help you prepare for retirement, emergencies, and other unexpected expenses.
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