How To Manage Your Money - Simply and Effectively
The downturn in the economy has many wondering how to manage your
money in a way that is effective, safe and efficient. While no budgeting technique
is perfect or will fit all situations, there are some methods that anyone can apply
that can help demystify your money matters and put more money in your pocket.
These money management strategies will help you get a handle on spending
and allow you to begin to pay down debt and build savings. While some of these
methods may seem simple, they are effective because they target behavior as well
as financial strategy.
Many people feel that they need to earn more money when you simply need
to alter spending habits so that the money you make goes farther. Click
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how to manage your money.
The First Step To Better Money Management - Tracking
One of the first steps is to track your spending. You should begin to write
down everything that you spend money on. Keep a small notebook with you and a
pen so you can record every transaction. This is important because if you think you
will remember and write it down later you are wrong.
It is very easy to forget what we spend money on. Little things like coffee or
tickets to a show can easily slip our minds if we do not write them down.
Record every transaction you make for at least two weeks.
This should be ample time to show you where your money is going. Look at
this list carefully and seek out ways to eliminate spending. Perhaps you can make
your own lunch instead of getting take-out or make your own coffee instead of
purchasing expensive drinks. It is a good idea to break the list down into
expenditures that are necessary and those that are choices.
An example of a necessary expenditure would be car insurance while an
expenditure of choice would be a movie rental. After two weeks you can decide
areas to eliminate spending and set a budget for other areas like eating out or
Cash Only Folks
Another great way to get a handle on spending is to use only cash. When
you pay with cash, the brain experiences a sensations of pain. Studies have
demonstrated that people routinely spend more when they are paying by credit
card. Keep a fair amount of cash on hand each week to cover your expenditures.
You will likely find that you are unwilling to part with some of the money and
some of the items on your list of necessary expenditures will transfer over to
spending by choice.
After you have accumulated some extra cash each week, you can then begin
to apply this extra money to either a savings account or to paying down debt.
You will need to write down all of the debt that you owe and then arrange
this debt from the smallest debt to the largest. When doing this, pay no attention to
interest rates or other details and arrange the debts only from smallest to largest
Apply some of the saved money to your smallest debt. When this is
eliminated take the same amount and apply that to the larger debts getting rid of
them each in order. You will find that this has an encouraging effect on you as you
see your debts lessen and eventually disappear. You will build momentum paying
down your debt this way. Once credit cards are paid off it is best to cut them up
and never use them again.
Plan for Disaster
Many people wonder what they will do if an emergency arises and they do
not have a credit card. This is where your emergency fund comes into play.
You need to develop an emergency fund that covers at least three months of
your expenses. Learn how to manage your money in a way that eliminates getting
caught off guard.
You will know what your expenses are because you kept tract of your
transactions for two weeks.
These expenses will also include monthly bills and any monthly payments
that you have to make. If you begin with an emergency fund of 1,000 dollars you
will be well on your way to covering your expenses. This cushion will prevent you
from needing credit cards in case of an emergency. It will help turn an emergency
into a minor problem or inconvenience as you will have the cash to cover the
Time Value of Money
Another great way to manage money more effectively is to no longer look at
money as what it can buy, but as a measure of time. Money invested is used to buy
back your time. Determine what the value is for each of the activities you fill your
time with is as a measure of time. If you are mowing the lawn, you are spending
your time at a value of how much per hour? If you are working, how much do you
make per hour.
Following your assessment of time valued income. Look at your purchases
as losses of time. When you consider buying a new gadget, consider how much
time it costs you. This will dynamically change your relationship with money for
Knowing how to manage your money effectively will ensure that you are
using money to empower your personal finances rather than letting your spending
decisions sink your future. Managing your money effectively is not as difficult as it
first seems, requiring only your attention and a little effort. Doing so well, will
transform your life and provide all the freedoms and rewards money can provide.
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