Money management is essential if you want to build a comfortable lifestyle for yourself and keep out of financial trouble. However, many Americans struggle with managing their money.
Nearly 40% of American adults report that they wouldn’t be able to come up with $400 in case of an emergency. That’s shocking, considering unexpected expenses pop up from time to time. If you want to prepare for the worst and increase your financial well-being, check out this simple advice.
Create a budget
A budget is an essential money management tool. It enables you to keep track of your income and expenses, monitor your spending, and put aside money for future goals. With a budget, you’ll be able to know exactly where your money is going and it will be easier to find areas where you can cut back and save.
Although some people may have a general idea of what their spending looks like each month, many fail to actually write down an actual budget. Why is this? It’s because people believe that coming up with a budget will be a tedious and boring process — they’ll have to tally up their expenses and do a bit of accounting.
However, it’s one of the most important steps you can take if you want to manage your money better, so in the long run, the effort will likely be worth it. If adding up everything yourself is too much trouble, though, there are all kinds of budget templates and tools available for free online.
Contribute to your savings
Deposit a portion of each paycheck into a savings account in order to build a financial safety net for yourself. Having a well-funded savings account prepares you to handle emergencies and deal with the unexpected costs that often arise in life.
So be consistent in depositing money into your savings account, even if it’s just a little bit, and then let it sit there. Don’t touch the money or dip into your savings unless you absolutely have to — just let it sit in the bank earning interest.
If you really want to make your money work for you, then consider seeking out wealth management services. A financial advisor can help you manage your money, make smart investments, and design a financial strategy that puts you on track to achieving your goals.
Eliminate debt
Debt can be crippling to your financial well-being. It causes a lot of stress and oftentimes costs a lot of money. So take your debts on one by one and work to eliminate them entirely.
Start by paying off the smallest debts and work your way up to the largest ones. By paying off small debts first, you’ll open up more money in your budget that can go towards paying off the big debts.
You might also consider alternative ways to deal with debt, outside of just simply paying it off. For example, you can often negotiate a debt down so that you pay less than the full amount. After all, most creditors would like to receive some form of payment rather than writing the debt off as a loss.
To negotiate your debt, you usually have to explain your financial situation to the creditor or debt collector and present them with a reasonable repayment plan, where you either give them a lump sum or a series of installments.
Most importantly, don’t take on any more debt while you’re trying to get out of debt. Either throw out your credit cards or severely limit their use. If possible, put a hold on making big expensive purchases until you’re debt-free.
Save for retirement
It can be hard to imagine that you’ll actually retire one day, especially if you’re young. But that day will come and the earlier you start saving for it, the better off you’ll be.
Make regular contributions to your retirement accounts. Put money in a 401(k) if your employer offers one — if they match your contributions, then contributing the maximum amount is a no-brainer.
In any case, try to devote at least 10% of your take-home pay to retirement savings. Small deposits add up over time and compound interest causes the amount to snowball over years. So incorporate retirement savings into your monthly budget and start saving while you’re young if you want to live in comfort during your older years.
When it comes to finances, many people struggle to stay organized — but you don’t have to be one of them. Combine the above tips with common sense and you’ll be on your way to achieving your financial goals.
Sep 22, 2020
