Entering 2022, many of us will make better money management part of our new year resolutions. But what exactly is money management? Money management is a plan for your money so that you can make the most of it.
At its very essence, managing money wisely is known as personal finance, and it involves saving, budgeting, avoiding or reducing debt, and investing in your future. If managing your money seems too stressful or intimidating, the secret is to take it one step at a time. In this post, we’re offering 6 money management tips to improve your finances.
1. Create a Budget
The start of the new year is the perfect time to create a budget. Although it is not possible to anticipate every expense that could arise in the following 12 months, having a big-picture budget can help you prepare for repeated costs that come up every year, such as car repairs, mortgage payments, holidays, and birthdays celebrations, and so on.
If you don’t know where to start, try choosing a system that you will stick with. For instance, you can try the 50/30/20 budgeting rule, which allocates 50% of your income for needs, 30% for wants, and 20% for savings or paying off debt.
2. Learn From Past Mistakes
In order to get closer to your financial goals in 2022, it’s worth taking some time to review your spending habits in the past year or the past several years.
We’ve all made stupid money-related mistakes at some point, whether it is missing loan payments, falling for a scam, or getting into too much debt. But instead of feeling bad about those mistakes, try to learn something from them. Think about where things went wrong, then make a plan, and make sure not to repeat the same mistakes again.
3. Get Overspending Under Control
With the wide availability of online shopping and daily bombardment by one-click ads, it’s easy to fall into the trap of overspending,
Gaining control of your expenses is key to meeting your money goals, but you won’t be able to really control your spending until you know where your money is going. Start by tracking all your expenses for one month. Keep your recent credit and debit card statements, as well as all the receipts for cash transactions to see where your money is going and whether you’re spending more than expected on certain things.
4. Have an Emergency Fund
An emergency fund is money you set aside in order to cover unexpected expenses, such as health emergencies, unexpected car or home repairs, or job loss.
Having an emergency account prevents you from spending on a whim. Just think about it, if the money is only as far away as your closest credit or debit card, you might easily get tempted to use it to buy something frivolous like an expensive pair of shoes, which is definitely not an emergency. By putting your money in a separate account, you will know exactly how much you have and how much you might still need to save.
Finally, having an emergency fund will ensure you don’t make bad money decisions, like borrowing money when you urgently need cash. With an emergency fund, you will have instant access to money without any fees, interest, or penalties.
5. Automate Your Savings
One of the best strategies to save money is to make saving automatic. By automating your savings, you are more likely to make saving a consistent priority and see your savings grow.
Setting up an automatic sweep into an investment or savings account will make it easier for you to save money and meet your financial goals. In addition, you will spend less because there will be less money readily available in your checking account.
6. Download a Budgeting App
The best money budgeting apps, such as Mint, PocketGuard, and Zeta, help you understand your income and spending so that you can maintain complete control over your finances. These apps can connect to your credit cards and bank account to automatically download transactions and categorize your spending in accordance with the budget you set.
Many budgeting apps have features that match your budgeting style, easily integrate with your accounts and come at an affordable price.
One last word of advice – be persistent. Everybody starts with good intentions but there are many temptations that can make you fall off the money management bandwagon. Oftentimes, sticking to your budget will feel suffocating, but don’t get discouraged. Your finances won’t improve overnight, so be sure to give yourself some time. With a solid plan and dedication, you’ll be able to manage your money with ease.