Did you know, life could be a lot easier if you could manage your finances better? Money management is not a skill that many have mastered. That is why most people end up broke or worse, in debt, even when they make more than enough money per month.
When you manage your finances better, whatever money you have will be more than enough for you. But if you don’t learn how to properly handle your money, no amount of money will be enough for you, no matter how much you earn.
You will always find yourself broke without even knowing how it happened especially if you compare it to how much you are actually making. That is why it is important to be able to manage your finances.
Most people might think, I don’t even earn that much, how am I supposed to even manage this little money? But everything is doable if you put your mind to it and decide to do it. Moreover, managing your little money will help you to handle money better when you have more.
So it shouldn’t matter how much you make or how much you have, just learn how to manage it. Below we will discuss some few tips on how to manage your finances better.
6 ways to manage your finances better
1. Get rid of debt
The first step to manage your finances better is to make sure you get rid of all your debts and avoid debts as much as possible. This is because, debt comes with a fee.
Yes, every time you take out a loan for something or you use your credit card to purchase something, that debt isn’t for free. It comes with a charge known as interest. And you are supposed to pay the money you took and the interest in a period of time or you risk the interest going higher.
So this basically means that when you take debt, you end up paying even more because of the debt. And the longer time it takes, the higher the interest rate.
Therefore, to be able to manage your finances effectively, you have to make it a point to get rid of all your debt. And once you’ve been able to get rid of all these debts, make sure you avoid debt at all cost.
2. Track your expenses
You also have to make sure you are tracking your expenses. This will help you know what you are spending your money on. It will be difficult to manage your finances better if you don’t know what you actually use the money for.
Once you start tracking your finances, you will find out what takes up most of your money. You will also be able to figure out which expense is worth it and which one isn’t. This will help you to know how to prioritize your expenses. This way you can tell what is worth it and what isn’t. You can decide what to let go and what to cut back on.
So tracking your expenses will help you to create a budget. Because you will know the things you buy on a regular basis and how much money you are putting into those things.
3. Create a budget
The best way to keep your spending in check is to create a budget. Not just creating the budget but sticking to it. If you create a budget and you don’t stick to it, then the budget is useless. That is why you must make sure you set realistic budget. One you can stick to and one that helps you manage your finances better.
To be able to create a realistic budget, you have to know your financial strength. That is how much money you are actually making, then you have to know what you spend on. The things you actually need and the things you don’t need. Once you have these information, you can create a realistic budget to help you manage the money you have.
Making a budget prevents you from overspending and ending up in debt. Because the budget is made only based on what you have. It helps you to create a financial plan for your money and set realistic goals for your income and expenses.
To make it easier to track your expenses and make a realistic budget, get this budget planner. It includes an expense tracker and a monthly budget planner to help you control your money.
The best way to ensure you always have some money is to invest. Yes, saving is good. But your money will still be the same amount of money if you save it.
Think about it this way, if you save a $100 for 5 years. After the 5 years, you will still have your $100 alright but that $100 cant buy the same number of things that they can buy today.
As time goes by, the price of things increase, so $100 today won’t still be the same value in 5 years. But if you should invest this $100, it will make you some more money. So in 5 years, that $100 wouldn’t still be $100. It will be more and worth more.
There are so many things you can invest in. You can invest in a side hustle, you can invest in real estate, precious metals or even in stocks. You decide. And investing in any of these things will make you some more money.
But that doesn’t mean you shouldn’t save. You also have to make sure you save enough for a rainy day and also invest what you can afford to lose. So only set aside a part of your income for investment.
5. Have an emergency fund
Make it a point to save some money aside as an emergency fund. An emergency fund should be enough to cover at least 3 to 6 months of your everyday expenses.
Once you track your expenses and you budget, it will be easier to figure out roughly how much you spend every month. When you know the amount you spend every month, set aside some money enough to cover 3 months of expense or more as an emergency fund.
This way, should anything unexpected happen, you will have some money saved to use and wouldn’t have to borrow money and end up in debt. So emergency money should only be used for emergencies.
Coming across a gorgeous pair of shoes you didn’t budget for is not an emergency and you shouldn’t use your emergency funds for things like that. Instead emergency funds should be kept for real emergencies. Like accidents, losing your job, or when you are sick.
6. Save for the future
Between expenses and children and paying of utility bills and mortgage, most people forget to save for retirement. But it is important to set aside some money for when you are retired and cant work anymore. You need to save some money for your future.
It doesn’t matter how old you are, it is never too early or too late to start saving for retirement. You can start now if you haven’t already. It doesn’t matter if you are in your 20’s or in your 50’s start saving something for retirement. This way you wouldn’t have to rely on anyone when you are retired.