A lot of people are not saving enough money or don’t know how to manage their finances. Well, we can’t blame them. Most often, managing money is not taught in school.
However, part of being an adult is managing your finances. How would you do that? It’s all about having motivating goals and a solid plan.
Here are several tips on how to manage money. These money management skills will help you learn how to manage money in your 20s!
Define Your Financial Goals
Whatever you dream about, list it. Is it buying a house? Starting a family? Traveling several times in one year? If these are your goals, you have to know that they will cost you. You might want to make these dreams of yours come true, but you have to start and set your goals this year.
One of the secrets on how to manage money wisely and achieving your financial goals is financial planning. When you set your dreams, think of both the long term and short term. In the next one or two months, what do you want to accomplish? Will you be able to save enough money? These are just some of the short term goals.
Goals of more than six months to a year are medium-term goals. An example of this would be buying a house in three years. On the other hand, long-term goals are like life projects. It’s deciding whether or not you will retire at 60 years old or younger.
In creating goals, you create financial objectives. When you create a monthly savings plan, you can easily see how you can buy that house you’ve always wanted in a few years.
When you add up all your purchases, you will see that it’s big. Before you know it, you are already overspending your budget. Try to track your spending and learn where you are overspending your money. Have a spending journal, write down your purchases, and save receipts. Categorize each of your purchases, and you will know where to cut down next time.
Don’t commit to new recurring monthly bills
Don’t take any loan simply because of your credit and income qualify. The bank does not know other obligations that you may have that might prevent you from paying on time. You have to decide for yourself whether you can afford a monthly payment based on your current financial state.
Create a Personal Budget
A personal budget is somewhat like a guide to help you reach your short, medium, and long-term goals. It helps track your expenses and income, so you have a clear view of your financial situation.
If you can follow your budget, you can say that you’re successful with your personal money management. When you create a strategy to reach these goals, you most likely will want to respect them. It is also essential that you save some money of around three to six months’ of your salary for any unexpected expenses. This way, when someone you love becomes ill, or you lose your job, you can still pay your expenses and rent.
Also, if you are self-employed and paying for your taxes individually, it’s best to include these on your budget.
A lot of people don’t like budgeting because they think it’s boring. Just imagine all the adding of numbers, listing expenses and making sure it all fits with what you have. Even if you’re not good with managing money, don’t make excuses with budgeting.
It’s just taking a few minutes or hours every month to check your spending. Think about what learning how to budget can bring to your life. Don’t forget to include taxes in your budget especially if it’s not removed automatically from your income.
Reduce and Eliminate Debt
A lot of people live beyond their financial means. With all the house loans, personal loans, credit card debts, and car loans, you have to pay these back. Don’t wait until these become too overwhelming for you. Take charge and pay off your debts as early as possible.
If not, it might have a lasting effect on your financial health the longer you are carrying your debt. Plus, it might end up costing you more. You can reduce your debt and cut out non-essential spending from your budget. Pay the minimum amount and the largest loans first.
Use the budget
Even if you do budgeting, but it’s just tucked away, it is useless. Check it at least once every month to help guide your spending habits. Update it when you spend on your monthly bills and expenses. You need to know how much money you can spend while considering expenses.
When it comes to budgeting, the money left after you remove expenses from your income is an essential part of it. If you have any leftover money, you can use it for entertainment and fun, but this will only be up to a specific amount. Avoid going crazy and going splurging. Try to limit yourself and ensure that anything you do won’t interfere with what you have planned for the rest of the month.
Check if you are paying the best prices
Make a money comparison when shopping and ensure that you are only going to pay for the lowest services and products. Always look for alternatives, discounts or coupons before anything else.
Save up for any big purchases
Delay your gratification and put off any large purchases. Be better in handling your money and avoid sacrificing your essentials. Give yourself some time to evaluate if purchasing is even necessary. Avoid all the interests when purchasing if you use your credit. It’s best to save up and buy it in one go.